Stocks Slip for 2nd Day; Dow Off 10
The stock market closed lower in moderate trading Tuesday, cutting some of the session’s worst losses but troubled by weak bonds and Persian Gulf tensions.
The Dow Jones average of 30 industrial stocks, which lost 14.99 points Monday, relinquished another 10.36 points and ended the session at 2,546.72. Broader market barometers also declined.
Bond prices were little changed as traders remained cautious over heightened tensions in the Middle East.
Wall Street analysts expressed dismay at the market’s second straight loss, particularly because they believe that many potential investors with large amounts of cash are waiting to buy stocks. But some strategists said the market was overdue for a correction following the large run-ups of last month.
“It was kind of disappointing that with all the liquidity around, we couldn’t shake things and go higher,” said Hugh Johnson, senior vice president at the First Albany Corp. brokerage. “Many people just said, ‘Let’s wait.’ ”
Bonds Attract Investors
Although little news emerged from the Middle East, the market still focused on the possibility that Iran would retaliate for the weekend deaths of Iranian pilgrims in Saudi Arabia and the growing U.S. naval presence in the region.
“The market has been overdue for a correction of sorts,” said Lawrence R. Helfand, manager of retail sales at Rodman & Renshaw Inc. in Chicago. “The Ayatollah’s looniness is just a convenient excuse to sell. By normal barometers, the market was overextended.”
Losing stocks outnumbered gainers by about a 3-to-2 ratio in New York Stock Exchange composite trading, with 947 down, 656 up and 389 unchanged. Big Board volume totaled 166.49 million shares, versus 207.84 million Monday.
Among the most prominent issues affected by profit taking were oil stocks, which had jumped Monday in anticipation that Middle East turmoil might restrict petroleum exports from the region and raise prices worldwide. Chevron fell 1 to 60; Mobil fell 1 3/8 to 53 1/2, and Amoco fell 7/8 to 86.
Manpower jumped 15 5/8 to 78 in heavy trading. The British employment services company Blue Arrow PLC offered to buy the world’s largest temporary employee agency for $75 a share. Ford Motor rose 3 to 105 1/8 after Merrill Lynch raised its 1987 earnings estimate for the auto company. Another notable gainer was Control Data, which rose 3 5/8 to 33 because of rumors that the company was a takeover target.
The Treasury’s closely watched 30-year bond was down 1/16 point, or about 62 cents per $1,000 in face value. Its yield of 9.01% was unchanged from Monday.
The 30-year bond plunged 1 1/8 points Monday, and its yield pierced the 9% level for the first time since May 21.
Corporate and municipal bond issues were unchanged.
Anthony Naylor, senior vice president of fixed-income securities at Rodman & Renshaw Inc., said bond prices are holding at lower levels because of market psychology rather than legitimate inflation threats: “The (Persian) Gulf isn’t as bad as people think.”
Fears and continued confusion over the Treasury’s refunding also prevented the bond market from recovering, analysts said. Dealers are reluctant to take on inventory ahead of the refunding tentatively scheduled for next week.
In the secondary market for Treasury bonds, prices of short-term government issues were between 1/32 point lower and 1/32 point higher, intermediate maturities rose between 1/32 point and 1/16 point while 20-year issues fell 1/8 point.
In corporate trading, industrials and utilities were unchanged in moderate trading.
Among tax-exempt municipal bonds, general obligations and revenue bonds were unchanged, Salomon Bros. said. Trading was light.
Yields on three-month Treasury bills were down 9 basis points to 5.85%. Six-month bills fell 2 basis points to 6.11% and one-year bills gained 1 basis point to 6.49%.
The federal funds rate, the interest on overnight loans between banks, traded at 6.87%, up from 6.75% Monday.
