FINANCIAL MARKETS : Dow Off 23.65; Traders Await Inflation Data
The stock market suffered a broad setback Thursday as traders warily awaited the latest temperature reading on inflation.
The government is due to report on the producer price index of finished goods for March, along with several other economic statistics today. Analysts expect the price index to show an increase of about 0.5%, down from 1% in both January and February. That would provide at least a tentative bit of evidence that a slowing economy was reducing upward pressure on inflation and interest rates.
The Dow Jones index of 30 industrials dropped 23.65 points to 2,296.00.
Declining issues outnumbered advances by more than 2 to 1 in nationwide trading of New York Stock Exchange-listed stocks. Volume on the floor of the Big Board came to 141.59 million shares, against 146.83 million in the previous session.
Losers among the blue chips included International Business Machines, down 1 7/8 at 109 1/4; Philip Morris, down 2 3/8 at 117 1/2; Coca-Cola, down 1 1/4 at 50 5/8, and American Telephone & Telegraph, down 1/4 at 31.
An exception was General Electric, which rose 1/4 to 45 1/4 on word that its first-quarter earnings increased to 94 cents a share from 80 cents in the like period last year.
Freeport-McMoran, which said it began a tender offer for as many as 15 million shares of its own stock, jumped 3 1/4 to 37.
Teledyne fell 3 7/8 to 346 1/2. The company reported first-quarter earnings of $6.32 a share, down from $12.79 in the comparable period last year.
Tokyo stocks closed lower Thursday on fears that Japan might raise its discount rate. The 225-share Nikkei index lost 192.51 points to close at 33,063.94.
London Stock Exchange prices shrugged off potentially worrisome data showing an acceleration in the underlying rate of increase of British average earnings to close only slightly lower. The Financial Times 100-share index closed down 4.3 points at 2,028.7.
Credit
Bond prices fell, reflecting nervousness that government economic reports due today would point toward higher inflation. “Junk-bond” issues were down sharply on reports that a major dealer in the high-yield securities would dump much of its holdings.
Bonds were also pressured by an interest rate increase by the Swiss National Bank, which raised fears that other central banks would follow suit.
Inflation and high interest rates erode the value of fixed-income securities such as bonds.
May Sell Holdings
The Treasury’s bellwether 30-year issue fell 17/32 point, or $5.30 for every $1,000 in face amount, as its yield, which moves inversely to price, rose to 9.15% from 9.10% late Wednesday.
In the junk-bond market, quoted prices for some issues fell by as much as two points, or $20 per $1,000 in face value, although professional investors told the New York Times that trades were being executed at lower prices than were quoted.
Dealers said the price drop was due in part to reports that Solomon Asset Management, a major junk-bond investor, would sell substantial portions of its holdings.
David B. Solomon, the firm’s founder, is leaving the company because of his cooperation with the government’s investigation of Drexel Burham Lambert Inc. junk-bond trader Michael Milken. Traders fear the firm would be forced to sell its huge portfolio to meet cash demands from pension clients who are nervous about the investigation.
Junk bonds are high-yield, high-risk securities issued principally by companies that cannot obtain investment-grade ratings on their debt securities. The also are used to raise cash for leveraged buyouts.
The federal funds rate, the interest on overnight loans between banks, traded at 9.8125% late in the day, the same as late Wednesday.
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