Stocks Retreat in Heavy Volume; Dow Sags 11.16
Stock prices fell modestly in heavy, erratic trading Wednesday as continued strong demand for stocks blunted a wave of profit taking.
The Dow Jones average of 30 industrial stocks, up 88.48 Monday and Tuesday, fell 11.16 to 2,669.32. Broader market measures mostly were lower. Meanwhile, the bond market ended largely unchanged in extremely light trading, muffled by fever in the stock market, no big surprises at a Treasury auction and the absence of any other significant economic news.
Trading remained heavy, with 235.70 million shares changing hands on the New York Stock Exchange compared to Tuesday’s 278.13 million, which was the exchange’s second-busiest day.
Declining issues outnumbered advancers by about 9 to 7.
Depressing prices was widespread selling by investors attempting to cash in gains made in the latest phase of the 5-year-old bull market.
Prices moved lower in early trading and remained on the minus side for much of the session. Stocks briefly edged higher at mid-afternoon, retreated in a late selling spree and later closed above their lows of the day.
“It’s the kind of a fallback you’d anticipate in light of the awesome advance you’ve had here,” said Monte Gordon, director of research for Dreyfus Corp.
On Its Own Momentum
Analysts had expected profit taking after prices rocketed higher Monday and Tuesday, but noted the relatively small declines Wednesday indicated that there still was plenty of demand for stocks.
“Considering the big mark ups earlier this week, it’s got to be considered a very good showing,” said Michael Metz, a vice president of Oppenheimer & Co.
As with other recent sessions, Wall Streeters said, Wednesday’s strength stemmed largely from the market’s own momentum rather than from external factors deemed positive to stocks.
Money continued pouring into the market from investors who are unwilling to miss out on any further advances and who deemed any moderate price drops as buying opportunities, analysts said.
Much of the money has come from foreign investors, who view the recent level of stability in exchange rates as lessening the risk to U.S. investments from overseas.
In addition, there has been increasing speculation that the recent stability in interest rates, which are sharply higher than levels of six months ago, could signal a coming rate decline that would benefit corporate earnings and spur economic growth in general.
Wickes Makes NYSE Debut
Most long-term interest rates, considered the most sensitive to market speculation, edged lower Wednesday in the credit markets.
Wickes, based in Santa Monica, made its debut on the NYSE, closing at 20 3/8. The company, previously traded on the Amex, completed a 5-for-1 “reverse” stock split Tuesday in an effort to boost the shares’ image on Wall Street. On Tuesday, it closed at 4 on the Amex. The Treasury’s key 30-year issue rose 1/16 point or $1.25 per $1,000 in face amount, and its yield fell to 8.94% from 8.95% Tuesday.
In the secondary market for Treasury bonds, prices of short-term governments fell 1/16 point, intermediate maturities fell 1/32 point and long-term issues were up 1/16 point, according to Salomon Bros.
The federal funds rate, the interest on overnight loans between banks, traded at 6.688%, up from 6.438% Tuesday. In corporate trading, industrials and utilities were largely unchanged in light activity.
