FINANCIAL MARKETS : Dow Slumps 8.92 After Morning Rally Fizzles
A sudden selloff near the close pushed stock prices lower Thursday, wiping out an early gain that carried the Dow Jones industrial index briefly past 2,600 for the first time since the fall of 1987.
The Dow index, up about 30 points at its mid-session peak, closed with an 8.92 loss at 2,575.49.
Declining issues outnumbered advances 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 204.59 million shares, against 215.74 million in the previous session.
Analysts said the late decline stemmed in part from selling by professional traders engaged in computer program strategies involving options and index futures contracts, some of which expire after the close today.
They also said investors seemed to back away from an initially enthusiastic response to testimony by Alan Greenspan, chairman of the Federal Reserve Board, before the House Banking Committee on the Fed’s credit policies.
Greenspan said the central bank had taken note of a slowing in the pace of economic activity, and was seeking to avoid “an unnecessary and destructive recession.”
However, he also noted that inflation remained clearly above where the Fed would like to see it.
Brokers said Greenspan’s comments squared with the recent belief that the Fed was proceeding gradually to try to steer the economy toward a “soft landing” that could set the stage for renewed growth.
American Telephone & Telegraph led the NYSE active list and rose 1/4 to 37 1/8. The company reported second-quarter earnings of 65 cents a share, up from 55 cents a year ago.
Losers among the blue chips included General Electric, down 1/2 at 55 3/4; Procter & Gamble, down 7/8 at 116 1/4; Philip Morris, down 1/2 at 146 1/2; USX, down 1/4 at 35 5/8, and International Business Machines, down 1 5/8 at 112 3/4.
In Tokyo, share prices rose as investors who had been waiting to buy on expected declines after Japan’s election Sunday decided to move in early. The key Nikkei 225-share index rose 107.70 to close at 33,664.87.
Share prices ended slightly lower on the London Stock Exchange. The Financial Times 100-share index fell 0.2 points to 2,292.3.
Credit
Bond traders welcomed Greenspan’s hint of lower interest rates and sent bond prices modestly higher in an up-and-down session.
Most of the day’s gains were eliminated by a late-afternoon slide in prices that appeared to result from internal market workings rather than any fresh negative news.
Most bond prices rose about 1/8 point for the day, although the Treasury’s benchmark 30-year bond finished unchanged in price. Its yield, which moves in the opposite direction from its price, stayed at 8.13%, the same as Wednesday.
The federal funds rate, the interest on overnight loans between banks, traded at 9.188%, unchanged from late Wednesday, indicating that the Fed was not taking any immediate steps to ease credit.
Currency
The dollar lost ground in quiet domestic trading after closing mixed overseas as dealers digested Greenspan’s comments on the climate for interest rates.
Gold prices closed mostly higher. On the Commodity Exchange in New York, gold bullion for current delivery finished at $371.40 an ounce, up from $368.30 on Wednesday. Republic National Bank of New York quoted a bid of $370.85 at 4 p.m. EDT, higher than Wednesday’s $368.20.
Dealers worldwide monitored the Fed chairman’s semiannual report to Congress, but few came away with any clear indication of where interest rates might be headed.
In Tokyo, the dollar rose to 142.33 Japanese yen from 141.80. In London, the dollar closed lower at 141.45 yen. In New York, the dollar closed at 141.40 yen, down from 142.50 yen.
In London, one British pound cost $1.6273 late Thursday, more expensive for buyers than Wednesday’s late $1.6195. In New York, it cost $1.6230 to buy one pound, more expensive than $1.6127 on Wednesday.
Commodities
Pork belly futures prices soared by as much as 2 cents a pound, the permitted daily limit on the Chicago Mercantile Exchange, on signs that lower bacon prices may finally be stimulating demand for the sizeable supplies of pork bellies in cold storage.
Hog futures prices also rose while cattle futures were mixed.
On other markets, orange juice futures fell sharply for the fifth straight day; grains and soybeans finished mixed as the July contracts expired; precious metals erased some of Wednesday’s losses, and energy futures advanced.
Frozen pork bellies settled 1.53 to 2 cents higher, with the contract for delivery in July at 30.55 cents a pound; hogs were 0.03 cent lower to 0.98 cent higher, with July at 49 cents a pound; live cattle were unchanged to 0.20 cent higher, with August at 72.75 cents a pound, and feeder cattle were 0.22 cent lower to 0.07 cent higher, with August at 83.72 cents a pound.
The pork belly market turned in its strongest performance in more than six weeks in a delayed response to Tuesday’s weekly exchange report on pork belly stocks in U.S. commercial freezers outside of Chicago.
The report showed a net out-movement of nearly 5.4 million pounds last week, compared to 3.9 million pounds for the same period a year ago.
Orange juice futures prices fell the 5-cents-a-pound daily limit on the New York Cotton Exchange on perceptions that large supplies of Brazilian juice will soon hit the market.
Frozen concentrated orange juice settled 3.25 to 5 cents lower, with September at $1.546 a pound.
Wheat futures prices closed higher while corn and soybean futures finished mostly lower on the Chicago Board of Trade, where much attention was focused on the expiration of the July soybean contract.
Trading in soybeans for July delivery ended at 12:01 p.m. Central Daylight time after a spurt of selling that pushed the contract’s price down to $6.885 a bushel, 39 cents below Wednesday’s settlement price.
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