Dow Off 15.82; Interest Rate Jitters Blamed : Overseas Actions, U.S. Economic Data Cited
The stock market retreated in sluggish trading Thursday, as concerns about rising interest rates resurfaced on the first anniversary of the all-time peak in the Dow Jones industrial index.
“People’s attitudes are not as positive as they were a year ago,” said Jack Garry, manager of institutional trading at the brokerage Butcher & Singer Inc. in Philadelphia.
A round of interest rate increases overseas and a new U.S. economic report that contained an upward revision in one measure of inflation for the second quarter were cited by analysts as reason for the price slide.
They said the combination stirred worries that U.S. interest rates could be headed higher, making returns on Treasury securities more competitive with those expected from stocks.
The Dow Jones index of 30 industrials, which climbed 37.34 on Wednesday, lost 15.82 to close at 2,010.85. One year ago, the market’s best known barometer had closed at 2,722.42, its record high.
Advancing issues outnumbered declines by more than 2 to 1 in nationwide trading of New York Stock Exchange-listed stocks, with 453 issues up, 998 down and 501 unchanged. The NYSE composite index fell 0.99 to 146.94.
Volume on the floor of the NYSE came to 127.64 million shares, compared to 127.80 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 148.23 million shares.
Lending Rates Rise
The market opened lower and the Dow index extended its decline through the afternoon. The blue chip index was off 26.31 points at 2 p.m. before recovering some lost ground in the last two hours of the session.
Before the U.S. stock market opened, the West German central bank raised a key lending rate and banks in several other European countries followed suit.
Also in advance of the opening, the Commerce Department revised upward its estimate of second-quarter economic growth to 3.3% from 3.1%, and simultaneously boosted its estimate of an inflation measure tied to the gross national product to show a rise of 5.1%, up from 4.1%.
Analysts said the combination of European rate hikes and the revised inflation estimate stirred speculation that U.S. rates could be headed higher. Investors expect that if the economy continues to expand rapidly and inflation rises, the Federal Reserve may encourage higher interest rates.
Prices in the U.S. bond market slipped Thursday, nudging rates up.
The 30-year Treasury bond, for instance, lost about $5 for every $1,000 in face value, while its yield rose to 9.45% from 9.40% on Wednesday.
Lawrence R. Helfand, manager of retail sales at Rodman & Renshaw Inc. in Chicago, said the rising rates were offering “some stiff competition for the stock market.”
He noted that yields on one-year Treasury bills are above 8.2%, and are proving attractive for investors looking for a haven for their money in a volatile financial climate.
“We won’t make much headway until there is a sign that higher interest rates have begun to slow the economy,” he said.
Utility Stock Dips
Butcher & Singer’s Garry said he expects trading to remain sluggish until after the Labor Day holiday. “We are in a drifting pattern,” he said.
Northeast Utilities was the most active issue on the NYSE with more than 12.1 million shares traded. It fell to 18 3/4. Today is the deadline to qualify for the company’s quarterly dividend.
Insilco rose 1 1/8 to 31 1/8. The company’s board approved a $31.75-a-share buyout offer from two Texas oilmen.
Among active blue chip issues, International Business Machines fell 1 1/8 to 111 5/8, Exxon slipped to 45 3/4, American Express fell 5/8 to 28 1/8 and General Electric edged up 1/8 to 40 1/8.
In over-the-counter trading, Farmers Group rose 3/4 to 70. The company agreed to a $75-a-share takeover offer from BAT Industries of Britain, but some obstacles remain to completing the deal.
The Wilshire index of 5,000 equities closed at 2,589.704, down 16.521.
Standard & Poor’s industrial index fell 2.14 to 297.36, and S&P;’s 500-stock composite index was off 1.95 to 259.18.
At the American Stock Exchange, the market-value index fell 0.85 to 293.21. The NASDAQ composite index for the over-the-counter market fell 1.99 to 374.04.
On the Tokyo Stock Exchange, prices recovered moderately in thin trading Thursday, while the dollar edged downward. The Nikkei average of 225 selected issues gained 70.77 to close at 27,870.44.
In London, the Financial Times 100-stock index lost 39 to close at 1,780.2.
