Concern About Dollar Drives Dow Down 15
The stock market moved broadly lower Tuesday, depressed by concerns about the adverse consequences of a recently robust dollar.
The Dow Jones index of 30 industrials finished with a loss of 15.30 points at 2,503.54.
In nationwide trading of New York Stock Exchange-listed issues, losers swamped gainers by a margin of about 2 to 1, with 1,014 down, 503 up and 483 unchanged.
Volume on the floor of the Big Board came to 164.87 million shares, up from 151.46 million in the previous session.
Hugh Johnson, chief investment officer at First Albany Corp., said a weakening in long-term Treasury bond prices acted as a catalyst for the selloff in stocks and encouraged investors to prune their holdings of shares on which they had made substantial profits in recent weeks.
Also motivating sellers was a desire to collect their profits before the government reports a string of potentially market-moving economic statistics later this week. Reports on merchandise trade are due Thursday. On Friday, reports for May on consumer prices and housing starts will be issued.
The pharmaceuticals concern Pfizer partly blamed the dollar’s appreciation for an expected 30% to 40% decline in its second-quarter earnings. Disclosure of the disappointing estimate late Monday led Pfizer stock to plunge 3 1/8 to 58 in heavy trading Tuesday.
Other drug companies took a cue from Pfizer, including Syntex, which slid 1 1/2 to 50 3/4, SmithKline Beckman fell 1 1/8 to 61 3/8 and Warner Lambert tumbled 2 3/8 to 89.
Among other blue chips, International Business Machines jumped 2 1/8 to 111 as more than 2 million shares changed hands on news that an investment firm had confirmed its buy recommendation.
Time rose 5 to 180 as reports circulated that General Electric might enter the bidding for the publishing giant. GE led the actives’ list, closing with a loss of 3/4, at 53 1/2.
Time is fighting a hostile $175-a-share buyout bid from Paramount Communications in an attempt to preserve a planned stock swap merger with Warner Communications. Paramount rose 3/4 to 57 3/4 and Warner closed off 1/4 at 54 1/4.
In Tokyo, stock prices fell Tuesday when investors sold on fears of a discount rate rise to brake the dollar’s rise. The 225-share Nikkei index fell 184.46 points or 0.55% to close off its lows at 33,213.55, after surging 157.50 to a high 33,555.51 near the open.
In London the Financial Times 100-share index was down 15.3 points, or 0.7%, at 2,123.0, after slumping as much as 22.1 points at midday.
Credit
Bond prices fell Tuesday as many traders cashed in on the market’s recent robust rise.
The Treasury’s closely watched 30-year bond tumbled about 7/8 point, or $8.75 for every $1,000 in face value. Its yield, which moves in the opposite direction from price, jumped to 8.22% from 8.13% late Monday.
In the secondary market for Treasury securities, prices of short-term government issues slipped 7/32 point to 11/32 point, intermediate maturities declined 13/32 point to 5/8 point, and 20-year issues fell 13/16 point, according to figures provided by Telerate Inc., a financial information service.
Yields on three-month Treasury bills rose to 8.40% as the discount edged up 1 basis point to 8.13%. Yields on six-month bills rose to 8.24% as the discount increased 4 basis points to 7.82%. Yields on one-year bills advanced to 8.42% as the discount jumped 8 basis points to 7.83%.
The federal funds rate, the interest banks charge each other for short-term loans, was quoted late in the day at 9.31%, up from 9.25% late Monday.
Currency
Central banks helped push the dollar lower Tuesday as the U.S. government reported that the deficit in its broadest measure of foreign trade worsened dramatically in early 1989.
The dollar fell against all major currencies except the British pound, which was weakened by speculation of a rift between Prime Minister Margaret Thatcher and her top economic official, Chancellor of the Exchequer Nigel Lawson.
The pound finished the European trading day at its lowest level against the dollar in more than two years, although action by the Bank of England and a statement by Thatcher supporting Lawson raised it from its lowest levels.
In London, the pound slipped to $1.5162 late Tuesday. That was the pound’s lowest rate against the dollar since February, 1987. Late Monday, sterling cost $1.5250. In New York, the pound traded at $1.5270, down from $1.5285 on Monday.
In Tokyo, where trading ends before Europe’s business day begins, the dollar rose 0.30 yen to a closing 148.70 yen. Later in London, the dollar was quoted at 149.15 yen. In New York, the dollar fell to 147.75 yen from 148.46 yen on Monday.
In Hong Kong, gold rose $2.63 an ounce to close at a bid of $361.66.
Gold fell in London to a late bid of $359.50 an ounce from late Monday’s $359.95.
Commodities
Coffee futures prices dropped to a 10-month low Tuesday amid fears that the International Coffee Organization’s failure to forge a new price-support pact could leave unroasted coffee free to fall to as low as $1 a pound.
On other markets, orange juice futures rose sharply; grains and soybeans advanced; petroleum futures were mixed; precious metals gained, and livestock and meat futures were mixed.
Coffee futures settled 4.75 cents to 9.46 cents lower on New York’s Coffee, Sugar & Cocoa Exchange, with the contract for delivery in July at $1.1538, the lowest close since Aug. 8. The price of coffee for July delivery in New York has dropped more than 11% since Friday.
The loss of nearly 9 1/2 cents Tuesday was nearly twice as large as the decline posted Monday, when it became apparent the world’s largest coffee producer- and consumer-nations would end their nine-day meeting in London without an agreement to replace the 6-year pact that expires Oct. 1.
