Stock prices tumbled in late trading Wednesday, giving up an early gain under the pressure of renewed interest rate worries.
The Dow Jones index of 30 industrials, up more than 10 points in the early going, closed with a loss of 15.35 at 2,243.04.
Declining issues outnumbered advances by about 5 to 4 in nationwide trading of New York Stock Exchange-listed stocks.
Big board volume totaled 177.21 million shares, up from 147.43 million in the previous session.
Analysts noted that the market had shown signs since the start of the week of recovering from the jolt it suffered last week as a result of bad news on inflation and a round of interest rate increases.
The upswing continued as rates declined modestly in the bond and short-term money markets Wednesday morning.
But then the bond market gave up its gains as traders studied a government report showing stronger-than-expected gains in personal income for January.
By late afternoon, prices of long-term government bonds showed losses of about $5 for each $1,000 in face value. And stocks followed the bond market’s lead.
“People are coming to the belated recognition that interest rates will have to move higher,” said Abby Joseph Cohen, Drexel Burnham Lambert Inc. investment policy analyst.
Although the market rose Monday and Tuesday, investors have moved tentatively, worried that interest rates are likely to rise further. Stock prices took a beating last week after half-point hikes in the prime and discount rates.
“Investors aren’t quite sure what they want to do,” Cohen said. “That’s why the market has been so volatile.”
Losers among the blue chips included International Business Machines, down 1 5/8 at 119 7/8; General Electric, down 1/4 45; American Telephone & Telegraph, down 1/4 30, and Union Carbide, down 1/2 at 29 1/2.
Stock prices on the Tokyo Stock Exchange eased for the third straight session Wednesday, depressed by the U.S. dollar’s rise against the Japanese yen and uncertainty over interest rates. The Nikkei 225-share index gave up 21.30 to close at 31,964.30.
In London, stock investors virtually overlooked news of a wider-than-expected British trade deficit and bid shares higher on newly found hopes that the government might be able to avoid raising interest rates. At the close, the Financial Times 100-share index was up 18.9 at 2,021.3.
The dollar rose broadly Wednesday, benefiting from weakness in the British pound.
Gold prices pulled back in domestic and overseas dealings. Republic National Bank of New York quoted a late bid of $383.80 an ounce, down from $387 late Tuesday.
“The weakness of the pound pushed the dollar and the Deutsche mark higher,” said John McCarthy, chief dealer at the Amsterdam Rotterdam Bank in New York.
Sterling suffered because of unexpectedly bad figures on Britain’s trade performance during January and persistent doubts about Britain’s overall economic health.
Currency dealers dumped pounds after release of the trade report. In an effort to counter the selloff, the Bank of England, the country’s central bank, intervened in the market, buying pounds.
One pound cost $1.7243 in London late Wednesday, nearly 2 cents cheaper than Tuesday’s late $1.7430. It was the pound’s lowest level since Oct. 11, when sterling stood at $1.7175.
The pound later ended in New York at $1.72325, down from $1.7430 on Tuesday.
In the United States, dealers bid up the value of the mark on grounds that West German monetary authorities soon might raise interest rates to reduce economic activity and relieve inflationary pressures.
European dealers had earlier sold marks amid speculation there that prospects for higher West German interests have diminished, in part because of the currency’s strength.
In Tokyo trading, which ends before Europe’s business day begins, the dollar closed at 127.68 Japanese yen, up from 127.15. Later, in London, the dollar traded higher at 128.15 yen, and in New York, the dollar finished at 128.225 yen, up from 126.89 on Tuesday.
Bond prices fell sharply Wednesday as the market reacted poorly to two government reports showing modest economic growth.
The Treasury’s benchmark 30-year bond was off 17/32 point, or about $5.30 per $1,000 face amount. Its yield increased to 9.17% from 9.12% late Tuesday.
Analysts said the market resumed a downward trend in low-volume trading after two days of advances.
The main factors were government reports showing that personal income rose a stronger-than-expected 1.8% in January while construction spending rose 0.4%, which was in line with expectations.
“We seemed to hit a brick wall . . . coinciding with the release of construction and income data for January. They’re both reasonably vigorous,” said William V. Sullivan, director of money market research for Dean Witter Reynolds.
There has been concern in the bond market about sustained economic growth and rising inflation, both of which eat away at the value and yield of fixed-income securities.
In addition, Wednesday’s trading indicated that bonds are not getting help from the strength of the dollar overseas, which normally tends to make dollar-denominated issues more attractive to foreign investors.
In the secondary market for Treasury bonds, prices of short-term governments were down 3/32 point, intermediate maturities were off by between 7/32 point and 7/16 point and long-term issues fell as much as 21/32 point, according to Telerate, a financial data service.
Prices of copper futures soared Wednesday amid supply concerns prompted by labor unrest in Peru and underlined by the small number of copper delivery notices posted on New York’s Commodity Exchange.
On other exchanges, precious metals futures prices plummeted, soybean futures dropped sharply and grain, energy, livestock and meat futures were mixed.
Copper settled 3.9 to 8.8 cents higher on the Commodity Exchange, with the contract for delivery in March at $1.455 a pound, the highest settlement price for the March contract since Jan. 27, but still well below the record high for spot copper of $1.6475 a pound reached Dec. 8 on the exchange.
The rally was sparked by news that miners in Peru, the world’s sixth-largest copper producer, would consider extending a planned three-day strike if conditions warrant. The strike is scheduled to begin March 26.
The reports stirred memories of last fall’s 57-day Peruvian mining strike, which was a major factor in copper’s rise to record price levels.
Demand for copper remains strong and supplies continue to be tight, a situation reflected in the slim number of delivery notices posted Tuesday and Wednesday on the exchange.
Crude oil futures posted modest gains on the New York Mercantile Exchange, but prices for refined products ended narrowly mixed.
West Texas Intermediate crude oil settled 10 to 13 cents higher, with April at $18.28 a barrel; heating oil was 0.29 cent lower to 0.30 cent higher, with April at 50.49 cents a gallon, and unleaded gasoline was 0.08 cent lower to 0.30 cent higher, with April at 51.56 cents a gallon.
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