Stock Prices Slump; Dow Off 20.63 : Futures-Related Selling, Plunge in Tokyo Market Blamed

The stock market declined Tuesday, extending Monday’s fall on futures-related selling, nervousness over a big slump in the Tokyo market and lingering interest rate worries.

The Dow index of 30 industrials, which fell more than 11 points on Monday, dropped 20.63 to close at 2,097.26.

Declining issues outnumbered advances by about 9 to 5 in nationwide trading on the New York Stock Exchange.

Big Board volume totaled 144.11 million shares, down from 156.21 million Monday.

Share prices took the largest drop of the year Tuesday on the Tokyo Stock Exchange. The Nikkei 225-share index, which lost 251.67 Monday, plunged 513.09, or 1.89%, to close at 27,149.03.

“Interest rates and inflation are the big market scares now,” said Michael Metz of Oppenheimer & Co. “The dollar has forced foreign nations to raise interest rates, creating fears of a global rise (including the United States).”

Nervous Market

But Metz said the market’s fears could be misplaced and that the unsettled trading here and in Tokyo may merely reflect uncertainties over the recently higher dollar.

Monday’s report of a rise in capacity utilization rates to the highest level in eight years added to recent fears of Federal Reserve credit tightening to snuff out inflation.

Hugh Johnson, a senior vice president at First Albany Corp., noted that higher interest rates overseas coupled with fear that the Fed may also hike rates in this country “is the principal reason making the market nervous.”

He said the market largely discounted repeated double-digit corporate earnings increases for fear that “they will be neutralized by higher interest rates . . . down the road.”

The technology sector, which typically has been a leader in propelling the market to higher levels, was particularly weak. “It can be a little depressing (elsewhere in the market) when you see that group give ground,” Johnson said.

Brian Luedtke, analyst with Piper Jaffray & Hopwood Inc., pointed out that volume was relatively slow and that although bonds fell earlier, they had firmed.

Stock prices were mixed at the open of trading but soon headed lower. The Dow sank below the psychologically important 2,100 mark by midday and continued to hold at depressed levels despite repeated reports of higher second-quarter corporate earnings.

Among technology issues, Seagate Technology plunged 5 1/2 to 13 after a sharply lower earnings report. It was the most active over-the-counter issue, and one trader said Seagate’s decline affected other companies in the industry because it provides parts to other computer makers.

Elsewhere in the technology sector, IBM, which introduced new computers and personal software Tuesday, fell 1 3/8 at 124; NCR fell 3 3/8 to 58; Prime Computer was off at 15, and National Semiconductor was off at 11.

Prices also fell in quiet trading on the London Stock Exchange as the market digested Monday’s half-point rise in the British commercial banks’ base lending rate.

The Financial Times 100-share index dropped 4.5 to close at 1,844.8.