Dow Falls 7.47; Stocks Battered by Rising Oil Prices and Sagging Dollar
The stock market closed lower Thursday, ending a session of wide swings in blue chips exacerbated by program trading, rising oil prices, sagging bond prices and weakness in the dollar.
“The market was in a tug of war,” said Alfred Goldman, technical market analyst with A. G. Edwards & Co. “On one side was the bond market, which was slipping; on the other side was six weeks of positive momentum.”
The Dow Jones average of 30 industrials, down more than 20 points at one stage, closed with a 7.47 loss at 2,122.69. The average fell 28.45 on Wednesday.
Declining issues outnumbered advances by about 3 to 2 in nationwide trading of New York Stock Exchange-listed stocks.
Big Board volume came to 156.10 million shares, down from Wednesday’s 189.63 million. Nationwide consolidated volume in NYSE-listed issues, including those stocks on regional exchanges and in the over-the-counter market, totaled 180.67 million.
The Dow had been down as much as 26 points as oil prices soared because of the damage done to Britain’s oil production capacity by an explosion and fire at a North Sea drilling rig Wednesday.
Analysts were divided over the impact of the higher oil prices on the Dow. Goldman said he believed that the rise in oil prices “increased concerns about inflation,” but some other analysts said the event had only a short-term effect.
The Dow’s close above the 2,100 level, however, reassured some market watchers, who said that the market gave a good accounting despite its early stumbles. Jack Conlon, head of equities at Nikko Securities Inc., said: “From there (the 2,100 mark), I think the stage is set for an attempt at 2,200.”
“The market could have fallen apart,” said Donald Crooks, managing director in charge of equities at Morgan Stanley. “But commodities fell apart (in the afternoon) and the dollar came back,” he said.
The dollar was up in late trading, while bond prices were higher even though activity was muted before today’s release of June’s employment figures.
“The jobs figure will be closely watched, and if it shows continued strength in the economy, that will further increase the concern about a too strong economy,” Goldman said. He said most observers are calling for a 260,000 rise in non-farm jobs.
“It was kind of a neutral day. Every time it looked like the market was going higher, selling came in; and every time it looked like it was going lower, buying came in,” said George Pirrone, senior trader at Dreyfus Corp. “The market was trying to go up, but there was no energy to do it.”
Conlon said: “We saw very limited institutional activity by virtue of the overall volume. The market was program-driven once again. But on the heals of (the 28-point loss) yesterday, I think it didn’t live up to our worst expectations. I think we’re probably at the bottom end of a trading range.”
The 30-year Treasury bond closed at 101-6/32, down 6/32, while its yield rose to 9.01%.
Goldman said renewed tensions about the Persian Gulf with the weekend downing of an Iranian commercial airliner contributed to bearishness in the market. “I don’t think the book is closed on that incident. I think there is a concern about a pickup in terrorist acts.”
Occidental Petroleum dropped 5/8 to 26 in active trading. The company owns the oil rig in the North Sea where a fire Wednesday night resulted in many casualties and extensive damage.
The company said Thursday that the disaster was caused by a gas leak and added that it wouldn’t hurt its finances enough to force a change in its dividend policy.
General Electric rose 7/8 to 44 1/8. The company reported a 16% increase in second-quarter earnings.
Wheeling-Pittsburgh Steel gained 1 3/4 to 17 3/4. The company said it couldn’t explain the activity.
Carl Karcher Enterprises climbed 3 to 22 1/8 in the over-the-counter market. The company announced plans to buy back about 25% of its outstanding stock.
Apollo Computer, another OTC issue, tumbled 4 3/8 to 10 7/8. The company said it expects to report a loss for the second quarter.
On the Tokyo Stock Exchange, the Nikkei 225-share index lost 38.47 to close at 27,728.13. It climbed 189.43 on Wednesday.
Prices on the London Stock Exchange finished lower as price weakness on Wall Street spilled over into the London market.
The Financial-Times 100-share index fell 14.5 to 1,855.5.
