Market Drifts Lower in Sluggish Trading; Dow Index Eases 1.78
Stock prices declined slightly in a sluggish session Friday under the continuing influence of rising interest rates.
The Dow Jones index of 30 industrials slipped 1.78 to 2,037.52, extending its loss for the week to 81.61 points.
That ranked as the biggest weekly decline for the Dow since it fell 108.42 points March 21-25.
Declining issues narrowly outnumbered advances on light New York Stock Exchange trading. Volume on the floor of the Big Board came to 176.96 million shares, up from Thursday’s 173 million.
A big chunk of the day’s activity was concentrated in a few electric utility issues that were the targets of trading strategies keyed to their approaching dividend payments.
Otherwise, analysts said the market was weak and listless, still struggling to recover its balance after the Federal Reserve’s move Tuesday to raise its discount rate.
“There were fears of higher inflation and further Fed tightening,” said Jeffrey Applegate, capital market strategist with Tucker, Anthony & R. L. Day. Bond prices fell slightly and interest rates advanced on the credit market. The 30-year Treasury bond yield, which rises as prices fall, climbed to the year’s high of 9.42% from 9.39%. The dollar ended little changed in mixed trading.
The biggest factor remained speculation about the outlook for higher interest rates and the likelihood of further Fed tightening.
Strategies Shifting
The Labor Department’s report that the producer price index of finished goods rose 0.5% in July was in line with advance estimates. But analysts said some traders were troubled by the 0.6% increase in the index after the volatile food and energy components were excluded.
“The real crux of the matter is this atmosphere with the prime rate and with the discount rate coming up,” said John Brooks, managing director at Marshall & Co.
In a climate of higher interest rates, investors were staying away from cyclicals such as paper and chemicals, and picking up non-durable consumer stocks, Applegate said.
The retail sector, for example, showed some gains. J. C. Penney rose 1 to 48, K mart was up 3/8 at 32 1/2 and Woolworth gained 5/8 to 48 5/8.
Genentech’s stock fell 1 to 20 3/8 amid speculation that the company’s heart attack drug, Activase, may face tough competition from a much less expensive therapy.
Shares of Macmillan rose 1 1/2 to 83 after Robert Maxwell went ahead with a tender offer.
McGraw-Hill, which has been up and down on takeover talk, fell 2 to 65 3/4. It announced new restructuring plans for its financial services unit.
Among actively traded blue chips, General Electric rose to 40, American Telephone & Telegraph fell 5/8 to 25 and American Express was off 1/8 at 27 7/8.
National Semiconductor dropped 1/2 to 9 3/4 in active trading. The company said it will take a one-time charge of about $18 million in its current fiscal quarter and also said it believed that analysts’ estimates of its earnings for the quarter were too high.
Polaroid Stock Sinks
Trans World Airlines climbed 2 1/8 to 37. The company scheduled a shareholder meeting for Sept. 7 to vote on Chairman Carl C. Icahn’s proposal to take the company private.
Polaroid dropped 1 to 42 1/8. Shamrock Holdings revised its offer for the company, but analysts said traders were disappointed that the bid hadn’t been raised more substantially.
Best Buy, discussed as a prospective takeover candidate, gained 2 5/8 to 12.
The Wilshire index of 5,000 equities ended at 2,619.972, down 1.023.
The NYSE’s composite index of all its listed common stocks slipped 0.07 to 148.53.
Standard & Poor’s industrial index fell 0.32 to 301.94, and S&P;’s 500-stock composite index was down 0.20 at 262.55.
The NASDAQ composite index for the over-the-counter market dropped 0.16 to 378.95. At the American Stock Exchange, the market-value index closed at 296.48, down 0.26.
