Dow Skids 35.71 to End Dimmest Week This Year : Bond Prices Drop Sharply Amid Fears That Inflation Is Making a Comeback
The stock market took another beating Friday, closing out its worst week of the year amid worries over the dollar and rising interest rates.
The Dow Jones index of 30 industrials fell 35.71 to 2,639.35, stretching its loss for the week to 70.15 points.
That represented the average’s largest weekly decline since it fell a record 141.03 points Sept. 8-12 of last year.
Volume on the New York Stock Exchange was 156.33 million shares, against 163.61 million in the previous session.
Bond prices plummeted in light trading, pushing yields on long-term Treasury bonds to their highest levels in more than a year, amid investor concern that the Federal Reserve was moving to raise interest rates.
Investors Feared Pullback
Analysts said a wave of profit taking had been set in motion this week by renewed weakness in the dollar and rising interest rates that pushed yields on long-term government bonds above 9%.
Those circumstances raised fears of a replay of the market’s substantial drop last spring, when the dollar was slumping and interest rates took a sudden jump.
And analysts said many traders were concerned that the stock market, which hit record highs as recently as Tuesday, was due for a more pronounced pullback than already has occurred.
IBM, a prominent casualty in the recent selling, recovered to 166 1/2 in active trading Friday.
But IBM was the only gainer on the active list, and point-plus losses were common in other blue chips. Merck fell 3 to 201 3/4, American Express dropped 1 to 36 1/2, Alcoa slipped 2 1/8 to 55, Du Pont lost 1 5/8 to 123 5/8 and McDonald’s eased 1 3/8 to 57 5/8.
Tobacco stocks ran into profit taking for the second straight session. Philip Morris fell 2 5/8 to 116 and RJR Nabisco dipped 5/8 to 67 1/2.
Reebok International dropped 1 5/8 to 20 3/4. The company said late Thursday that its earnings for the third quarter would be up only slightly as a result of production delays arising from recent labor unrest in South Korea.
New Accounted Rule Blamed
Philips-Van Heusen posted the day’s biggest percentage loss among NYSE issues, down 3 7/8 at 19 3/4. The company said an offer to buy some of its shares at $28 each had been oversubscribed, and that it would accept a little more than half of the shares tendered.
Kansas Gas & Electric dropped 2 1/2 to 20 3/4. The company ascribed the drop to a new accounting rule that will have the effect of reducing its reportable earnings, although not its cash flow.
Declining issues outnumbered advances by more than 3 to 1 in the overall tally on the NYSE, with 397 up, 1,218 down and 391 unchanged. The exchange’s composite index fell 2.27 to 182.99.
Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 182.27 million shares.
Standard & Poor’s index of 400 industrials dropped 4.86 to 382.42, and S&P;’s 500-stock composite index was down 4.34 at 327.04.
The NASDAQ composite index for the over-the-counter market lost 1.50 to 453.29. At the American Stock Exchange, the market value index closed at 359.75, down 1.27.
The Wilshire index of 5,000 equities closed at 3,221.785, down 35.365.
The Treasury’s bellwether 30-year bond, which Thursday plunged about 1 1/2 points, or $15 per $1,000 in face value, lost another $6.25.
The bond’s yield, which moves inversely to its price, jumped to 9.19% from 9.12% on Thursday. The last time the bellwether bond had finished higher was on Feb. 15, 1986, when it closed at 9.22%.
Bond investors “are fearful that in due course the Fed is going to tighten” interest rates, said Arnold Moskowitz, a senior vice president of Dean Witter Reynolds Inc. “That hit the bond market badly.”
The federal funds rate, the overnight interest rate banks charge each other, was quoted late in the day at 6.75%, down from 6.94% on Thursday.
Among municipal issues, general obligations and revenue bonds lost 3/8 point in light trading.
