Bonds’ Decline Deflates Stocks; Dow Slips 13.16 : Takeover Issues Buck Trend, Manage Gains
The stock market closed lower after a whipsaw session Monday, with much of the loss coming late in the session because of depressed bond prices.
The Dow Jones average of 30 industrials, up 50.32 last week, dropped 13.16 to 2,170.34.
Declining issues outnumbered advances by about 7 to 5 in nationwide trading of New York Stock Exchange, with Big Board volume retreating to 170.59 million shares, from Friday’s 195.41 million. The average share price fell 12 cents.
The market lost about 10 points in the last hour of trading as prices in the Treasury bond market fell, ignoring sharply lower crude oil prices. The benchmark 30-year Treasury bond lost almost half a point to close at 102, lifting its yield to 8.93% from 8.89%.
‘People Are Cautious’
“All conditions for strength were there today. The dollar was strong, oil prices were lower and gold prices were down,” said market analyst Charles Jensen of MKI Securities. “Despite that, bonds were down.”
Without fundamental reasons to participate, investors did not have the resolve to take the market higher, traders said. “People are cautious and willing to take profits at the slightest excuse,” Jensen said.
Traders said bond prices may have been depressed by the expectation that the U.S. Treasury will probably offer a 30-year Treasury bond at next month’s auction. Congress over the weekend gave its approval for the Treasury Department to issue more 30-year bonds.
Despite the weak bond market, stocks did attempt to rally late in the session. But the brief flurry of buying was confined to blue chips and takeover issues, while the bulk of the market remained depressed.
Takeover developments from late last week and the weekend sent several prominent stocks higher.
Kraft jumped 10 to 102. The company rejected a $90-a-share takeover bid from Philip Morris and proposed instead a recapitalization plan it valued at at least $110 a share.
RJR Nabisco climbed 7 to 84. Kohlberg Kravis Roberts & Co. said it had organized a company to offer $90 a share for RJR, which said last week that it was considering a management buyout.
West Point-Pepperell rose 4 3/4 to 50. William Farley, chairman of Fruit of the Loom, began a $48-a-share bid for the company.
Chicago Pacific gained 13 to 56 5/8, and Maytag fell 2 3/4 to 23 3/4, after Maytag announced plans to acquire Chicago Pacific.
Takeover rumors and speculation spurred buying in such other stocks as Mead Corp., up 2 1/2 at 48, and MCA, up 2 3/8 at 49 3/8.
Given the frantic deal-making pace, analysts said, other stocks tended to suffer from neglect.
The takeover wave has helped carry stock prices lately to new highs since the crash last fall. But some observers worry that it might eventually lead to trouble for the market, by heaping huge new amounts of debt on an already-extended economy.
Energy stocks were weak as the price of oil tumbled $1.20 a barrel to $13.17 on the New York Mercantile Exchange. Amoco dropped 1 1/2 to 74 3/8; Chevron fell 5/8 to 46 3/8; Mobil dipped 5/8 to 45 5/8, and Atlantic Richfield dropped 1 7/8 to 80 7/8.
Airline issues, meanwhile, moved up on prospects for lower fuel prices. UAL rose 1 1/8 to 98; NWA was up 1 to 53; Delta Air Lines gained 3/4 to 51 1/8, and AMR rose 1/2 to 50 1/2.
The Wilshire index of 5,000 equities fell 10.131 to 2,784.313.
The NYSE composite index of all its listed common stocks dropped 0.57 to 158.85.
Standard & Poor’s industrial index fell 1.36 to 325.48; its 500-stock composite index was down 1.38 at 282.28.
The NASDAQ composite index slumped 1.36 to 387.23; the American Stock Exchange index closed at 304.95, down 1.12.
In trading on the Tokyo Stock Exchange, share prices closed lower Monday after fluctuating moderately in the minus zone throughout the day to close just above their lows in thin, dull trading. The Nikkei 225-share index lost 57.03 to close at 27,281.54.
In London, the Financial Times 100-share index fell 10.9 to 1,848.4.
