Dow Slips 5.96 in a Quiet Market Marked by Interest Rate Concerns
The stock market posted a small loss in a quiet session Friday amid uncertainty about the outlook for interest rates.
The Dow Jones average of 30 industrials slipped 5.96 to 2,280.40, trimming its gain for the week to 45.03 points.
Volume on the New York Stock Exchange slowed to 160.11 million shares from 183.06 million in the previous session.
On Friday morning New York’s Citicorp raised its prime lending rate to 8% from 7.75%, and many other money-center banks quickly followed suit.
The prime is generally regarded as a lagging indicator of interest-rate trends, and the latest increase was interpreted by some analysts as simply a response to the rise in open-market rates that occurred earlier last month. Nevertheless, the news served to unsettle the market a bit.
Rates also turned upward again in the bond market, pushing prices of the Treasury’s closely watched 30-year bond down nearly 1 5/8 points, or about $15 per $1,000 in face value. Its yield stood at 8.58%, up from 8.44% Thursday.
Declining issues outnumbered advances by about five to four on the NYSE. The exchange’s composite index of all its listed common stocks slipped 0.22 to 162.64.
Yields on three-month Treasury bills jumped 17 basis points to 5.60%, according to Telerate. A basis point is one-hundredth of a percentage point. Six-month bills rose 3 basis points to 5.96% and one-year bills were up 17 basis points at 6.31%.
The federal funds rate, the interest on overnight loans between banks, was quoted at 7%, down from 8.5% Thursday.
Bank stocks were mostly higher. Citicorp added 1 3/8 to 54 3/4, Chase Manhattan was up 1/2 to 38, Chemical New York rose to 42 3/4 and Manufacturers Hanover added 7/8 to 43 3/4.
Electrospace Systems soared 6 5/8 to 27. The company said it has begun talks with potential suitors.
Firestone Tire & Rubber rose 1 1/8 to 38. On Thursday, the company projected higher earnings from continuing operations for its current fiscal year.
Bally Manufacturing fell 7/8 to 18 3/8. The company reported a quarterly loss of more than $26 million, against a profit in the comparable period a year earlier.
Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 185.42 million shares.
How Other Indexes Fared
Standard & Poor’s index of 400 industrials lost 0.10 to 334.30, and S&P;’s 500-stock composite index was down 0.33 at 288.03.
The NASDAQ composite index for the over-the-counter market rose 0.63 to 418.44.
At the American Stock Exchange, the market-value index closed at 325.17, down 0.02.
The Wilshire index of 5,000 equities closed at 2,871.073, a drop of 0.10. Bond prices turned sharply lower Friday, as euphoria over the prospects for a firmer dollar quickly evaporated and the credit markets were consumed by uncertainty over the future of the U.S. economy.
“The uncertainties about the future course of policies are just enormous,” said Jeffrey R. Leeds, economist for Chemical Bank in New York.
He said that after pushing bond prices higher Thursday, traders came back into the market Friday with doubts about the prospects for a joint U.S. and Japanese move in support of the dollar.
Federal Reserve Chairman Paul A. Volcker had told a congressional panel on Thursday that the central bank was pushing U.S. interest rates higher to prop up the dollar. Later, Japanese Prime Minister Yasuhiro Nakasone said he had instructed Japan’s central bank to lower interest rates.
Secondary Markets
The combination of higher U.S. rates and lower rates in Japan were viewed as a stabilizing force for the dollar as well as bond prices, analysts said.
In the secondary market for Treasury bonds, prices of short-term governments fell between 8/32 point and 11/32 point, intermediate maturities dropped between 17/32 point and 1 1/8 points and 20-year issues tumbled nearly 1 1/2 points, according to figures provided by Telerate Systems.
The movement of a point is equivalent to a change of $10 in the price of a bond with a $1,000 face value.
