Market Posts a Loss for 3rd Straight Session : Dow Off 3.20 to 2,102.06; Interest Rate Fears Cited
The stock market gave ground Tuesday for the third consecutive session as concerns about interest rates weighed on prices and more than offset the scattered gains that resulted from takeover speculation.
The Dow Jones industrial index closed 3.20 points lower at 2,102.06. The broader market was also lower, with declining stocks ahead of advancing issues by about 7 to 6 in nationwide trading of New York Stock Exchange-listed stocks.
Volume on the floor of the NYSE came to 157.76 million shares, up from 130.38 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 184.92 million shares.
Smaller Earnings Gains
“It’s still an uphill battle,” said Jack Baker, head of block trading for Shearson Lehman Hutton Inc. “As long as the bond market stays here and dollar stays here, we can probably hold at 2,100 (on the Dow Jones industrials).”
Bond prices held firm Tuesday while the dollar finished mixed in foreign exchange trading.
Rao Chalasani, chief investment strategist for Prescott, Ball & Turben in Cleveland, said stock prices are suffering because of the near 9% yields available on 30-year Treasury bonds.
He said investors also face the prospect of more modest corporate earnings gains for the foreseeable future than they saw in the second quarter.
On the other hand, he said stocks are drawing some support from proposed stock buybacks and buyouts and from demand from foreign investors.
That was clearly illustrated Tuesday as Pillsbury was the most active issues on the NYSE, rocketing 18 to 57 after receiving a takeover bid of $60 a share from Britain’s Grand Metropolitan PLC.
Gene Jay Seagle, vice president and director of technical research at Gruntal Financial Inc., said the bid may remind investors that there are some significantly undervalued stocks available.
“This message ought to again be heard by the Street that stocks in the United States are selling on a lower value basis than the rest of the world seems to consider fair,” he said.
Analysts also said worries that the September jobs data, due Friday, may show a stronger-than-expected rise and thus suggest higher interest rates, kept investors sidelined.
Chalasani said his firm expects some acceleration in the economy to begin showing up in upcoming data.
Employment Outlook
“We don’t believe the economy was as weak (as the August reports suggested),” he said. “Possibly after the elections we could see short-term rates moving up.”
Jerome Hinkle, co-manager of trading at Sanford C. Bernstein, said his firm is also expecting a strong employment report. “There’s certainly enough concern that’s been expressed about that,” he said.
Among other active issues Tuesday on the NYSE, Manville rose 1 1/8 to 2 7/8. Its reorganization plan appeared to move a step closer to fruition after the Supreme Court refused Monday to hear an appeal.
Inco Ltd. rose 1 7/8 to 30 7/8 after announcing a recapitalization plan that includes a special dividend of $10 a share.
Among widely held stocks, International Business Machines fell 3/8 to 114 1/2, Eastman Kodak dropped 1/8 to 45 3/4 and General Electric was off 3/8 to 42 7/8.
On the American Stock Exchange, Texas Air was the most active stock, slipping 1/8 to 14. It announced a $50-million agreement to allow Scandinavian Airlines System to lease New York area airport gates and giving SAS the option to buy up to 10% of Texas Air’s stock.
Stock prices finished lower in Tokyo, but near the day’s high in a session partly paralyzed by a wait-and-see mood, brokers said.
The Nikkei 225-share index shed 44.51 points to finish at 27,501.02. It lost 154.60 points on Monday.
In London, stock prices closed slightly higher in fairly active trading Tuesday. The Financial Times 100-share index closed up 4.7 points to 1807.3. Market watchers noted prices staged a smart turnaround toward the end of the session and completely erased earlier losses.
