Stocks Slip in Quiet Trading; Dow Off 6.25
Stocks retreated Tuesday in the third-lightest trading session of the year, reflecting what brokers called the kind of apathy and pessimism that has afflicted the market through much of 1988.
The Dow Jones industrial index barely budged through mid-afternoon but weakened late in the session and closed 6.25 points lower to 2,162.68. Broader market indicators also declined.
Most big institutional investors weren’t participating and those that were largely limited their transactions to end-of-year portfolio adjustments and a few speculative takeover situations, strategists said.
Others attributed the stock market’s weakness to a price drop in the bond market, which sent yields higher and made bonds a more attractive investment.
Volume on the floor of the NYSE totaled 87.49 million shares, only slightly better than the second-lowest level of 81.76 million in the previous session Friday.
Losing issues outnumbered advances by more than a 7-to-5 ratio in composite NYSE trades, with 800 down, 554 up and 599 unchanged.
In Tokyo, broad-based buying pushed stock prices sharply higher Tuesday, leaving the Nikkei 225-share index at a record high of 30,050.93, up 182.92 points from Monday’s close.
All financial markets in London were closed for Boxing Day, the post-Christmas holiday.
COMMODITIES
Coffee futures prices fell sharply in thin trading on New York’s Coffee, Sugar & Cocoa Exchange, reflecting an improved outlook for supplies of green unroasted coffee beans from Brazil, the world’s largest producer.
On other markets, grains and soybeans were mixed, energy futures rose, precious metals gained, livestock futures advanced while pork bellies declined, and stock index futures retreated.
The near-term supply scenario for Brazilian coffee brightened considerably late last week when dockworkers in the South American nation agreed to end a 10-day strike.
News of the settlement barely stirred the U.S. coffee futures market last Friday morning but some analysts called Tuesday’s steep selloff a delayed reaction. The Coffee, Sugar & Cocoa Exchange and most other U.S. futures exchanges closed at midday on Friday for the Christmas holiday weekend and did not reopen until Tuesday morning.
CREDIT
Bond prices skidded lower in very light trading as investors were disappointed by the results of the Treasury’s weekly bill auction.
The Treasury’s bellwether 30-year bond lost 13/16 point, or more than $8 for every $1,000 in face value. Its yield, which moves inversely to its price and is an indicator of interest rate trends, surged to 8.97% from 8.90% Friday.
Analysts said trading was quiet, with some dealers still away because of the holidays. The light activity tended to exaggerate price movements.
Harold Nathan, senior financial economist with Wells Fargo & Co. in San Francisco, said prices sagged after the results of the government’s auction were announced.
In the sale, interest rates on short-term Treasury bills rose to the highest levels in almost four years.
Traders were also concerned by the surging federal funds rate, Nathan said. The federal funds rate, the interest banks charge each other on overnight loans, can be an indicator of whether the Federal Reserve is tightening or relaxing credit.
Federal funds were at 9%, up from 8.813% Friday. Nathan said traders interpreted the rate’s high level as evidence of tighter credit--which leads to higher interest rates overall, and therefore lower bond prices.
In the secondary market for Treasury bonds, prices of short-term government issues were down 7/32 point to 9/32 point, intermediate maturities fell between 5/16 point and 21/32 point, and 20-year issues dropped 3/4 point, according to figures provided by Telerate Inc., a financial information service.
CURRENCY
The dollar closed mostly higher on domestic markets after ending mixed overseas as foreign exchange activity settled into a year-end lull.
Gold prices were mixed. Republic National Bank of New York reported a bid of $417.50 an ounce for gold as of 4 p.m. EST, down from late Friday’s $418.25.
Currency trading was extremely quiet.
“It’s the week between Christmas and New Year’s, London is closed and there’s no news,” said Richard Witten, vice president for foreign exchange at Goldman, Sachs & Co.
“There’s virtually no flow of transactions back and forth,” Witten said, adding, “It’s a paper work day.”
In Tokyo, where trading ends before Europe’s business day begins, the dollar rose 0.08 yen from Monday’s close to close at 124.80. Later in Europe, the dollar was quoted at the same rate, and in New York the dollar rose to 124.935 yen from late Friday’s 124.80.
The British pound rose to $1.8030 in Europe, compared to $1.80125 in London on Friday. In later New York trading, sterling edged up to $1.8023 from late Friday’s $1.8020.
Other late dollar rates in New York, compared to Friday’s prices, included: 1.7775 West German marks, up from 1.7755; 1.4990 Swiss francs, up from 1.4985; 6.07125 French francs, up from 6.0640; 1,309.25 Italian lire, up from 1,307.50, and 1.9725 Canadian dollars, up from 1.19625.
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