Dow Drops 10; Interest Rate Jitters Blamed : Analysts Also Say Many Are Cashing In Profits
The stock market suffered a moderate setback Monday, yielding to profit taking induced partly by rising interest rates.
The trading pace slowed as prices pulled back.
The Dow Jones average of 30 industrials dropped 10.13 to 2,176.74.
Volume on the New York Stock Exchange came to 143.30 million shares, down from 184.10 million Friday.
Analysts said there was nothing dramatic in the news to account for the market’s softness.
But they noted that the runaway advance in stock prices since the start of 1987 had lately showed signs of losing momentum. That was enough, analysts said, to encourage traders to cash in some of their gains, hoping perhaps to reinvest the proceeds at lower prices in a few days or weeks.
In the first 26 sessions of the year through last Friday, the Dow Jones industrial average chalked up 20 gains and just six losses.
In addition, stocks got no help from the bond market. The Treasury’s key 30-year bond fell 13/16 point, or about $8 for every $1,000 in face value, while its yield rose to 7.52% from 7.46% late Friday.
Losers among the blue chips included International Business Machines, down 2 at 133 3/4; Ford Motor, down 1 3/4 at 75 1/2; Eastman Kodak, down 1 1/8 at 75 7/8; Dow Chemical, down 1 at 73, and RJR Nabisco, down 1 1/2 at 60 1/8.
Sears Bucks Trend
Sears, Roebuck bucked the trend, gaining 1/2 to 46. The company raised its quarterly dividend to 50 cents a share from 44 cents.
Diamond Shamrock led the NYSE active list, down 3/8 at 14 1/2. The company, which is planning a restructuring, rejected a takeover bid by financier T. Boone Pickens Jr. Pickens’ group subsequently dropped its offer.
Reebok International rose 1 7/8 to 30 1/2, posting one of the day’s best percentage gains. The company reported an order backlog of $445 million as of Jan. 1, up from $325 million a year earlier.
Many bank stocks showed fractional losses in response to the rise in interest rates. Citicorp dropped 3/4 to 55 3/4, Chemical New York fell to 48 1/8, Chase Manhattan dipped 1/2 to 39 3/8 and Manufacturers Hanover slipped 1/2 to 47.
Government bond prices fell sharply Monday as the credit markets continued to be depressed by the falling dollar.
“The plunge in the dollar took its toll on Treasury prices,” said William Sullivan, director of money-market research for the investment firm Dean Witter Reynolds.
The dollar dropped against most major currencies Monday after Treasury Secretary James A. Baker III dismissed speculation that the big five financial powers would meet soon to try to stabilize foreign exchange markets.
Bond prices have fallen along with the dollar in its recent decline, reflecting trader concern that dollar-denominated securities, such as bonds and notes, will be less attractive to foreign investors.
In the secondary market for Treasury bonds, prices of short-term governments were about 5/32 point lower, intermediate maturities ranged from 7/32 point to 15/32 point lower, and long-term issues fell 7/8 point, according to figures provided by Telerate Inc.
In corporate trading, industrials fell 3/8 point and utilities were 1/8 point lower in light trading, according to the investment firm of Salomon Bros.
