Dow Slips 1.28; Market Mixed on Economy
The stock market closed on a mixed note Thursday, with blue chips easing and the broader market rising as an economic report indicated a slowdown in the economy and suggested that inflation may still be a problem.
The Dow Jones index of 30 industrials dropped 1.28 to 2,482.59.
Advancing issues outnumbered declines by about 4 to 3 in nationwide trading of New York Stock Exchange-listed stocks.
Volume on the floor of the Big Board came to 154.47 million shares, down from 178.60 million in the previous session.
While the revised figure was lower than expected, analysts said growth had been dampened chiefly by large inventory declines. Lower inventories actually help the economy grow in the future because they show that businesses will need to produce more goods to meet demand.
That initially appeared to be a plus for stocks by reinforcing evidence that the economy was slowing in response to the Federal Reserve’s campaign to restrain inflationary pressures.
But accompanying figures showed no downward revision of the pace of inflation over the January-March period.
Among actively traded blue chips, Philip Morris rose 2 5/8 to 140; Eastman Kodak gained 1/8 to 44 7/8; General Electric dropped 7/8 to 52 3/4, and American Telephone & Telegraph was down 1/4 at 35 1/4.
Takeover rumors and speculation sparked active trading in such issues as Maytag, up 2 1/8 at 23 1/2, and Syntex, up 1 1/4 at 47 3/4.
Del Webb Corp. rose 7/8 to 13 7/8 on word of the cancellation of a planned offering of $50 million in convertible debentures. The company cited market conditions.
The debentures would have had the potential to increase the number of claims on the company’s earnings.
Analysts noted some tentative buying in depressed precious-metals stocks. ASA Ltd. rose 1/2 to 39 5/8 and Hecla Mining 1/4 to 12 1/8.
LIN Broadcasting climbed 4 3/4 to 101 in the over-the-counter market. The company announced plans to spin off a new subsidiary that will own seven of its television stations.
A slightly weaker U.S. dollar against the Japanese yen on the foreign currency markets sent stocks prices higher in slow trading Thursday on the Tokyo Stock Exchange. The key Nikkei 225-share average closed up 153.57 points at 34,005.39.
Share prices ended slightly higher on London’s Stock Exchange, gaining little incentive from British trade figures that were in line with market expectations. The 100-share index closed 3.9 points higher at 2,136.6.
Credit
In the credit markets, bond prices fell sharply, depressed by the disappointing GNP report and by the dollar’s slide on foreign exchange markets.
The Treasury’s key 30-year bond fell 17/32 point, or $5.31 per $1,000 in face amount, while its yield, which moves in the opposite direction from price, rose to 8.67% from 8.62% late Wednesday.
Bond prices began their decline early in the day, after the government’s revised report on the gross national product was issued.
Analysts also said the report still indicates a robust economy.
When the economy is strong, the Federal Reserve is less likely to loosen credit, and allow interest rates to fall. If credit remains tight, interest rates will rise and, conversely, bond prices will slip.
The federal funds rate, the interest on overnight loans between banks, traded at 9.813%, up from 9.75% Wednesday.
Commodities
Grain and soybean prices were mixed in light trading on the Chicago Board of Trade but received some strength from a weaker dollar.
On other markets, precious metal prices climbed, livestock and meat prices were mixed, and energy futures were mostly lower.
The dollar fell as concern grew about central bank intervention and interest rate hikes abroad.
The weakened dollar brought some buyers back into the grain and soybean markets. Its strength had been believed to be holding down export sales of grain, analysts said, since a more expensive dollar makes U.S. commodities less attractive to foreign buyers.
Corn and soybean prices bounced back despite the National Weather Service’s latest 6- to 10-day outlook. The forecast, released late Wednesday, calls for normal to above-normal rain in most major growing areas.
Analysts say soybean futures have lost about 65 cents during the past two weeks. And there is a feeling that the selloff is a little overdone, setting the stage for a short-term rally, said Anne Frick, an analyst with Prudential-Bache Securities Inc. in New York.
Energy futures were mostly lower on the New York Mercantile Exchange.
Livestock prices were mixed and pork futures mostly lower on the Chicago Board of Trade.
“Pork bellies were down because we have a large inventory,” said Dale Durchholz, an analyst with Agri-Visor Service Inc. in Bloomington, Ill.
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