Stocks Down in Quiet Trading; Dow Falls 26.85
The stock market retreated broadly Tuesday, reflecting deepening disappointment that federal budget talks have failed to produce a compromise after more than two weeks of closed-door wrangling.
The decline occurred in relatively subdued trading activity, however, and market indicators were recovering as the session moved toward the close.
The Dow Jones average of 30 industrials, which rose 14.09 on Monday, fell 26.85 to close at 1,922.25.
The widely followed market index fell 52 points by noon, breaching the 1,900-point level and extending the selloff begun Monday afternoon after President Reagan said it would be wrong to raise taxes to cut the budget deficit.
Reagan’s remark touched off fears that the negotiators are still far from an agreement to trim the deficit and the talks, in their fourth week, could drag on. However, after the market closed, the negotiators said Tuesday that they were extending the talks into a night session for the first time.
Eroding Confidence
“The market is looking for a willingness to do something that looks responsible,” said Philip Erlanger, chief technical analyst for Advest Inc., a brokerage based in Hartford, Conn.
Hugh Johnson, chief investment officer for the regional brokerage firm First Albany Corp., said the inability of congressional leaders to reach a budget agreement with each other and the White House is eroding the confidence of investors, making them leery about getting back into the market.
Declining issues led gainers by 3 to 1 in the overall tally of New York Stock Exchange-listed issues. The NYSE composite index fell 1.95 to 136.21.
Volume on the Big Board came to 148.25 million shares, compared to 164.34 million shares Monday.
The market opened lower and drifted slowly but steadily downward through the morning session. It traded erratically at lower levels in the early afternoon but recovered during the final 90 minutes.
Analysts say the financial markets view a compromise on the budget as a sign that the United States is willing to act and not simply talk about cooperating with other nations in restoring stability to the world’s financial markets after last month’s frightening declines in stock prices.
But some analysts say that even if a budget compromise is reached, the stock market may simply turn its attention to other problems.
“The market remains fixed in this post-crash trauma,” said Larry Wachtel, a vice president at Prudential-Bache Securities.
Prices on the London Stock Exchange finished well off their highs of the day. The Financial Times-Stock Exchange 100-share index rose 6.4 to close at 1,684.7 after gaining more than 50 points earlier in the day.
In Tokyo, stock prices opened lower and then rallied, pushing the 225-share Nikkei stock average up 66.26 points in light trading to close this morning at 22,410.54.
