Dow Slumps 8.95; Jittery Investors Remain on the Sidelines
Stock prices fell Friday as investors, bombarded with a spate of contradictory economic signals, continued to worry that interest rates are headed higher.
The Dow Jones industrial index finished down 8.95 points at 2,032.33, but that was well above the blue chip indicator’s lows for the day and closing out the week with a net gain of 17.24 points.
Advancing issues and declines were evenly balanced in the daily tally on the New York Stock Exchange. Declines had earlier predominated by as much as a 5-2 ratio.
Big Board volume came to 135.62 million shares, just a bit above the 1988 low of 128.68 million recorded Thursday.
A second consecutive monthly gain in the leading economic indicators, coupled with news that a Washington bank raised its prime lending rate, undermined the market, brokers said.
Riggs National Bank of Washington raised its prime lending rate to 8.75% from 8.5%. Analysts said the increase came as no real surprise, given the recent rise of open-market money rates that help determine banks’ cost of funds, and no large money-center banks moved to match it.
In fact, interest rates in the credit markets showed signs of steadying after rising on Thursday.
In the bond market, the Treasury’s 30-year bond fell 3/16 point, or about $1.87 per $1,000 in face value, while its yield was unchanged at 9.10%.
The federal funds rate, the interest on overnight loans between banks, fell to 7% from 7.063% late Thursday.
Nevertheless, analysts said stocks were still suffering from a dearth of buying interest among both individual investors and professional money managers.
Growth Continues
The market showed little reaction to the Commerce Department’s report that the index of leading economic indicators rose 0.8% in March. The figure came in close to estimates.
The higher indicators and a larger-than-expected revision of past month indicators suggest that the economy is continuing to grow, unencumbered by the effects of the October stock market crash.
While that is good news in itself, investors worry that more evidence of strong economic growth--coming on the heels of Thursday’s drop in jobless benefit claims--may encourage the Federal Reserve to drive up interest rates.
MGM-UA Communications rose 1 5/8 to 18 3/8. The Wall Street Journal quoted entertainment industry executives as saying several foreign companies were looking MGM-UA over as a possible acquisition candidate.
Aetna Life & Casualty dropped 1 1/8 to 42. The company reported lower operating earnings for the first quarter, and said that it didn’t expect its operating profits for the full year to equal its 1987 results.
Ford Motor dropped 3/8 to 47 despite the company’s report Thursday of record first-quarter profits.
Other losers among the blue chip and glamour issues included Procter & Gamble, down 1 1/8 at 77 1/8; General Motors, down 1/2 at 75; Digital Equipment, down 1 1/8 at 104 7/8, and Exxon, down 1/8 at 44 7/8.
Indicators Drop
Golden Nugget gained 1 3/8 to 15 on top of a 1 1/2-point jump Thursday. The company said it would follow its policy of declining to comment on unusual market activity or rumors.
Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 157.64 million shares.
The NYSE’s composite index lost 0.46 to 147.87. The Wilshire index of 5,000 equities closed at 2,608.520, down 6.558.
Standard & Poor’s industrial index lost 1.61 to 304.48, and S&P;’s 500-stock composite index was down 1.28 at 261.33.
The NASDAQ composite index for the over-the-counter market added 0.47 to 379.24. At the American Stock Exchange, the market-value index closed at 303.14, up 1.64.
Meanwhile, share prices on the London Stock Exchange ended almost unchanged Friday as a fickle market shrugged off some good news about the nation’s trade outlook.
The Financial Times 100-share index closed at 1,802.2, off 2.2 points from Thursday’s close.
