Stock Prices, Following Dollar’s Lead, Decline
Stock prices moved lower Monday as the market, disheartened by a drop in the dollar, fell victim to a late round of futures-related selling.
The Dow Jones index of 30 industrials, up about eight points in the early going, was off 16.97 at 2,218.39 by the close.
Declining issues outnumbered advances by about 5 to 3 in nationwide trading of New York Stock Exchange-listed stocks, with Big Board volume declining to 141.64 million shares from Friday’s 166.10 million.
Traders said the thin volume exacerbated the decline. “We saw a few programs,” one futures trader said, “but we weren’t going down on a whole lot of volume--it’s been a pretty slow environment.”
The equities market was undermined by the resolve of the world’s major central banks to arrest the dollar’s rise. The U.S. currency, which nearly hit 1.88 West German marks last week, closed at 1.8310 marks Monday in New York, down from 1.8375 at Friday’s close. A falling dollar tends to reduce the appeal of U.S. assets.
In addition, the market’s key Dow index has run up against a psychological barrier as it has approached 2,246.74--the level at which it closed on Oct. 16, 1987, the trading day before Black Monday, when it plunged 508 points.
‘Digesting Recent Gains’
But stock market analysts generally were not too disturbed by Monday’s performance, which follows a nine-point gain in the Dow last week and a 3% rise since the beginning of the year.
“It’s been a consolidation day; the market is digesting the recent gains,” said Harry Laubscher of brokerage house Tucker Anthony, R. L. Day.
In recent sessions, analysts said traders had been responding favorably to generally strong fourth-quarter earnings reports.
They also said money managers at investing institutions continued to put some of their large cash reserves into the market.
In foreign trading, prices closed sharply higher on the Tokyo Stock Exchange, snapping a two-day losing streak as stable foreign exchange rates lured investors back into the market. The Nikkei 225-share index gained 162.50 to close at 31,332.88.
On the London Stock Exchange, share prices also closed higher, but sharply below their best levels. The Financial Times 100-share index closed 7.2 points up at 1,924.7, a post-crash high.
CURRENCY
Nine central banks beat the dollar lower, selling the currency in the open market for the fourth-straight trading day.
The major European central banks, the Bank of Canada and the U.S. Federal Reserve cut off a dollar rally early in the New York trading day with three coordinated bouts of intervention, traders said.
As usual, the Bank of Japan stayed out of the action. Traders believe that the Japanese central bank is being reserved as the ultimate weapon in case massive central bank action is needed to stabilize the dollar.
Leonhard Gleske, a director of the West German Bundesbank, was reported to have said that he would prefer to see the dollar fall below 1.8 marks. That statement was influential in driving the dollar down, said Alexis Egan, a trader at Banque Indosuez in New York.
In Tokyo, where trading ends before Europe’s business day begins, the dollar rose 0.15 Japanese yen to a closing 128.20 yen. Later, in London, it was quoted at 127.80 yen. In New York, the dollar fell to 127.55 yen from 127.68 yen late Friday.
In London, the dollar fell against the British pound. It cost $1.7733 to buy one pound, more expensive than $1.7670 late Friday. But the pound edged lower later in New York to $1.7760 from $1.7765 late Friday.
Other late dollar rates in New York, compared to late Friday’s levels, included: 1.8319 West German marks, down from 1.8365; 1.5490 Swiss francs, down from 1.5600; 1.1883 Canadian dollars, down from 1.1894; 6.2328 French francs, down from 6.2598, and 1,343.5 Italian lire, down from 1,346.1.
COMMODITIES
Futures prices for grains were mixed on the Chicago Board of Trade as trading volume continues to be affected by the FBI probe of alleged fraud on the CBOT and Chicago Mercantile Exchange.
“Generally, it has had some effect,” said Tom Gidel, grains analyst with G. H. Miller. “It has caused some confusion among traders.”
Wheat futures prices were supported by reports that the Soviet Union was bidding on 660,000 tons of U.S. export bonus wheat and that the Philippines was seeking offers on 365,000 tons of the commodity, said Gidel, based in Chicago.
Heavy weekend rains in Brazil and northern Argentina helped improve the prospects of soybean crops there, resulting in a negative mood in soybean trading, Gidel said.
Livestock and meat futures prices mostly retreated on the Merc.
Tom Morgan, president of Sterling Research Corp. of Arlington Heights, Ill., said he also thinks that the FBI probe has had some impact on trading lately.
“It’s got to have a little impact. The bigger traders are off looking for lawyers,” he said. “But overall it shouldn’t have a big impact because the commercial houses do the bulk of the trading and they aren’t affected.”
Prices for frozen pork bellies were depressed by expectations of record supplies Tuesday when the Agriculture Department delivers its cold storage report on Dec. 31 inventories.
Steady to lower spot prices sent live hog prices lower, said Morgan, while a weakness in wholesale prices and on the spot market lowered prices for cattle futures.
