Market Gets Jitters; Dow Drops 18.67
Wall Street’s Dow industrials fell below 2,100 Tuesday in a selloff spurred by a sharp rise in commodity prices and active program trading.
The Dow Jones industrial index finished down 18.67 at 2,092.64 after recovering about 10 from its lows. It last closed below 2,100 on June 20, when it closed at 2,083.93.
Declining issues outnumbered advancing ones by about 7-to-3 in nationwide trading of New York Stock Exchange-listed stocks.
A rebound in corn, soybean and gold prices renewed inflation fears. That hurt the bond market, and weakness in the bond market carried over to stocks, said William LeFevre, a market strategist for Advest Inc.
“The market is running out of steam,” said Monte Gordon, research director at Dreyfus Corp. “It didn’t respond yesterday to the (declines in) oils and the Commodity Research Bureau index. Technically, the market has turned weaker and has become more vulnerable.”
Awaiting Clues
Crude oil futures fell nearly $1 a barrel to 20-month lows Monday and Tuesday, but the Commodity Research Bureau index Tuesday recouped a third of Monday’s six-point drop.
“Uncertainty over inflation and interest rates and monetary policy have hit a raw nerve,” Gordon said. Last Friday’s report of a surge in new jobs in June revived the market’s fears that the Federal Reserve will be obliged to tighten credit.
Many potential buyers are waiting on the sidelines to see if Federal Reserve Board Chairman Alan Greenspan will drop clues about near-term monetary policy when he speaks before Congress today.
“The market is very nervous with a whole bunch of numbers coming up. People are unwilling to take a position,” said Edward Shopkorn, a general partner at Mabon Nugent.
The Commerce Department will announce the trade figures for May and June producer prices Friday and June retail sales Thursday. Analysts caution that the market could have a bad reaction Friday if the U.S. trade deficit is substantially higher than $11.5 billion.
Computer Stocks Weak
The Dow index opened higher Tuesday but faltered within the first hour. The fall gathered pace after noon when the major market index, a basket of 20 blue chip stocks widely used in program trading, went to a discount over cash stocks. This led to heavy selling of the underlying issues, traders said.
The market was further undermined by soft U.S. bond prices and a small drop in the dollar following central bank intervention in Europe.
Major computer stocks performed poorly. International Business Machines fell 2 to 124 7/8 and Digital Equipment sank 3 1/8 to 109.
Polaroid rose 1 1/2 to 31. The company announced plans to cut up to 8% of its U.S. work force, repurchase up to $300 million of its shares and enter the conventional film business worldwide.
Coleco Industries sank 1/2 to 1 3/8. The toy maker announced that it had sought protection from creditors under Chapter 11 of the Bankruptcy Code.
Xidex rose 1 3/8 to 9 in heavy over-the-counter trading of more than 3.8 million shares. The maker of computer disk drives said it agreed to be acquired by Anacomp for $10 a share in cash. Anacomp fell 1 1/8 to 9 7/8 on the NYSE in heavy trading.
Among other over-the-counter stocks, Intel rose 1 1/8 to 35 3/4 on heavy trading after reporting that its earnings nearly tripled in the latest quarter. Micron Technology fell 5/8 to 23 on news that two top officers resigned.
Volume on the floor of the NYSE, swollen by dividend-related trading, came to 161.65 million shares, up from 123.20 million in the previous session. Nationwide, consolidated volume in NYSE-listed issues, including trading at regional exchanges and on the over-the-counter market, totaled 184.79 million shares.
Three issues involved in dividend-capture strategies together accounted for 17 million shares of the volume on the NYSE floor.
The NYSE index fell 1.40 to 151.62.
Standard & Poor’s index of 400 industrials fell 3.14 to 309.67, and S&P;’s 500-stock composite index fell 2.70 to 267.85.
The American Stock Exchange index fell 1.27 to 307.31; the NASDAQ composite index fell 0.63 to 393.52.
The Wilshire index of 5,000 equities closed at 2,685.911, down 22.144 from Monday.
On the Tokyo Stock Exchange, the Nikkei 225-share index closed at 28,099.84, up 113.85 from Monday.
Share prices fell on the London Stock Exchange in a spiritless session. The Financial Times 100-share index finished 18.3 points lower at 1,858.5.
