Market Suffers Biggest Setback in Last 6 Weeks : But New Takeover Moves Keep Bullish Pot Boiling

The stock market suffered its biggest setback in more than six weeks Monday, yielding to sellers after last week’s rise to record highs.

But a fresh round of takeover developments kept the bull market pot bubbling.

The Dow Jones average of 30 industrials dropped 20.11 to 2,260.12, for its biggest one-day loss since it fell 44.15 in a wild session Jan. 23.

Volume on the New York Stock Exchange came to 165.43 million shares, down from Friday’s 181.59 million.

Analysts said some investors concluded that the market was overdue for a pause or pullback after its runaway rise since the start of the year.

Pressure on prices apparently was intensified by selling on the part of professionals engaged in computer-program strategies involving options and futures on stock indexes.

Expectations have increased lately that the market might encounter some periods of volatility between now and the end of next week.

March 20, a week from Friday, marks a quarterly “triple-witching hour” with a set of options and futures on stock indexes approaching expiration.

Among the blue chips, American Express fell 3 5/8 to 76 7/8, International Paper declined 1 1/8 to 97 3/8, RJR Nabisco slipped 1 1/8 to 59 5/8, Minnesota Mining & Manufacturing dropped 1 5/8 to 125 and Digital Equipment retreated 1 5/8 to 167 1/2.

Meanwhile, on the mergers and takeovers front, American Motors rose 3/4 to 4, and Chrysler was up 1 1/2 at 53 7/8. Chrysler said it signed a letter of intent to acquire AMC.

Elsewhere in the auto sector, General Motors gained 1 to 78 1/2, and Ford Motor added 7/8 to 81 7/8.

USAir Group, which made a $69-a-share offer to buy Piedmont Aviation, fell 3 3/8 to 47 3/4. Piedmont was down 5/8 at 67 5/8, and Trans World Airlines, which had previously made a hostile bid for USAir, dropped 2 1/2 to 28.

Caesars World climbed 3 to 27 3/4. Martin T. Sosnoff, a New York money manager and Caesars’ biggest shareholder, offered to buy the company for $28 a share.

Supermarkets General was up 6 7/8 at 41 3/4. Dart Group said it made a $41.75-a-share bid for the company.

Allegheny International jumped 8 5/8 to 24 on word that the company agreed to a $24.60-a-share acquisition by First Boston Corp. First Boston’s shares fell 1 1/2 to 49.

Declining issues outnumbered advances by about two to one on the NYSE, with 516 up, 1,049 down and 406 unchanged.

Large blocks of 10,000 or more shares traded on the NYSE totaled 2,911, compared to 3,507 Friday.

In the credit markets, bond prices ended a lethargic trading session mostly unchanged, which analysts attributed to the lack of any new meaningful economic data and investor wariness about the outlook for interest rates.

The federal funds rate, the interest on overnight loans between banks, traded at 6.188%, up from 5.938% Friday.