Wall Street's concern about the weak dollar reared its head again Tuesday, sending stock prices tumbling and snapping a four-day advance.
The Dow Jones average of 30 industrials dropped 46.46 points to 2,566.58, its eighth-largest daily loss. Declines outnumbered advances by about 5 to 2 on the New York Stock Exchange, with 1,178 issues losing, only 415 gaining and 396 unchanged.
Volume on the Big Board totaled 136.24 million shares, down from 154.38 million in Monday's session.
The dollar fell against all key currencies Tuesday after recovering from a slump late last week.
The dollar's slide, by making imports more expensive, has rekindled fears of inflation--one of Wall Street's key anxieties because it lessens the value of stocks. Inflation concerns also spilled over into the credit markets, where bond prices fell sharply, forcing interest rates higher.
The Treasury's closely watched 30-year bond slid 1 5/8 point, or $16.75 per $1,000 in face value, while its yield jumped to 9.68% from 9.51% late Monday.
Investors are concerned that the Federal Reserve--which raised its discount rate to 6% early this month in a bid to bolster the dollar--could hike the key rate again. The discount rate is the interest the Fed charges on loans to U.S. financial institutions.
Wall Street's negative mood prevailed despite some encouraging economic news, notably a Commerce Department report that retail sales climbed 1.3% in August, the biggest increase in six months.
"The economy is not the source of concern here; it's really the dollar and interest rates," said Michael Metz, market strategist for Oppenheimer & Co.
Among actively traded issues on the NYSE, Foster Wheeler fell 1 1/8 to 22 5/8. A group of companies led by New York investor Asher Edelman said it may consider seeking control of the engineering concern, but analysts said there was skepticism about the seriousness of Edelman's bid.
IBM dropped 4 1/2 to 157 1/2; Manufacturers Hanover was down 1/8 to 39 7/8; Exxon declined 1/2 to 46 3/4; AT&T; lost 3/4 to 32 1/8; General Electric fell 1 3/4 to 59 3/4, and Gillette eased 7/8 to 43.
Newmont Mining soared 5 5/8 to 101 1/8. An investor group led by T. Boone Pickens Jr. sweetened to $105 from $95 a share its tender offer for 28 million shares of Newmont.
Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 157.94 million shares.
Meanwhile, in the secondary market for Treasury bonds, prices of short-term government issues fell 5/32 point to 7/16 point; intermediate maturities declined between 15/32 point and 1 point, and 20-year issues were down 1 25/32 points, according to Telerate.
In corporate trading, industrials were off 3/4 point, while utilities fell 3/8 point in moderate trading, said Salomon Bros.
Moody's Investment Grade Corporate Bond Index, which measures price movements on 100 corporate bonds with maturities of five years or longer, fell 1.61 to 254.50.
Among tax-exempt municipal bonds, general obligations and revenue bonds fell 1 point in moderate trading, Salomon Bros. said.
Yields on three-month Treasury bills rose 6 basis points to 6.36%. Six-month bills advanced 7 basis points to 6.69% and one-year bills rose 4 basis points to 7.12%. A basis point is one-hundredth of a percentage point. The federal funds rate, the interest on overnight loans between banks, was quoted at 7.25%, up from 7.188% late Monday.