Dow Drops 14.58; Ends Day Below 2,000 Level
Stock prices closed lower Thursday, due in part to its disappointment with Ford Motor Co.’s earnings, which knocked the blue chip index off the 2,000 perch.
The Dow Jones industrial index, which managed to barely hold 2,000 on Wednesday, closed at 1,986.41, down 14.58.
Declines outnumbered advances by about 7 to 6 among New York Stock Exchange-listed issues.
Big Board volume totaled 151.43 million shares, against 176.83 million in the previous session.
The Dow index has consistently been unable to maintain the 2,000 level since the October stock crash.
Traders said that with little fundamental news to push prices either way, some investors were relying on technical signals to figure out the market’s direction. When the market failed to deliver any real movement above 2,000, it became vulnerable to a selloff, and the Ford earnings report provided the spark.
Ford fell 2 points to 42 after the company reported fourth-quarter earnings of $1.87 a share, up from $1.50 in the last quarter of 1986.
The earnings were lower than forecast, reflecting too many unsold cars in U.S. showrooms, analysts said. However, the figure was above the year-earlier period and the annual earnings were easily a Ford record.
The news from Ford pulled other auto stocks down. General Motors fell 1 1/2 to 67 1/2 and Chrysler was off 7/8 to 24 7/8.
Investors Intimidated
“Investors don’t have a strong sense of the direction of the economy and so they are groping around in the market not sure what to do,” said Hugh Johnson, analyst at First Albany.
“This is an anemic market that is constantly looking to be nourished with economic news,” he said.
“But one minute you have news that demands one conclusion and the next minute you have news that demands another conclusion. It is terribly confusing,” he said.
Johnson believes that the confusion has intimidated many investors, resulting in the light volume and the generally dull activity.
“The individual investors are nowhere to be seen in this environment,” said analyst Larry Wachtel of Prudential-Bache Securities.
The market rallied last week and Monday as some of investors’ worst fears about the business outlook eased.
But expectations for economic growth and corporate profits remain subdued, and many market participants were evidently reluctant to buy stocks with the Dow hovering around the 2,000 level.
Speculation also has died down lately that the Federal Reserve will take any new steps in the immediate future to relax its credit policy.
Investment Advice
Not everyone was entirely cool to the market, however. Charles Clough, chief investment strategist at Merrill Lynch, recommended that investors move some money from bonds into stocks, citing evidence of strength in the manufacturing economy, among other things.
He suggested that they have 50% of their money in stocks, 40% in bonds and 10% in money market investments, compared to a previous recommendation of 45% stocks, 45% bonds and 10% “cash.”
Hewlett-Packard was a standout gainer among the blue chip and technology issues, rising 2 to 59 1/2. The company reported earnings for its fiscal quarter ended Jan. 31 of 71 cents a share, up from 45 cents in the year-ago period.
Lomas & Nettleton Financial fell 1 3/8 to 15 on top of a 1 1/8-point drop Wednesday, when the company said it would take a charge of about $93 million in the current quarter in connection with moves to cease its home building operations and restructure its mortgage banking division.
Rorer Group jumped 4 5/8 to 58. The company said it had not been approached by anyone with a merger or acquisition proposal.
In foreign trading, prices on the London Stock Exchange fell after a weak early trend on Wall Street compounded earlier worries about inflationary pressure on the British economy.
The Financial Times-Stock 100-share index closed down 12 at 1,736.1.
The Nikkei Stock 225-share average closed at 24,675.36, up 245.41, on the Tokyo Stock Exchange on Thursday.
