Stocks Head Lower at End of Volatile Session; Dow Index Sinks 13.09
Stock prices turned downward near the close of a turbulent session Wednesday, running into some resistance at or near record highs.
Airline stocks extended their recent runaway rise, prompted by a bid for UAL Corp., and numerous other stocks jumped around in takeover-related trading.
The Dow Jones index of 30 industrials, up more than 10 points in early trading, closed with a 13.09 loss at 2,686.08.
The boom in airline stocks, meanwhile, sent the Dow Jones average of 20 transportation stocks surging ahead 50.49 points, or 3.72%, to 1,406.29.
UAL jumped 24 5/8 to 243 7/8 on reports that investor Marvin Davis was contemplating a price of $240 a share in his bid to acquire the company.
Intense takeover speculation continued in other airline issues. AMR gained 3 to 76 7/8; Delta Air Lines advanced 2 5/8 to 79 3/8, and Pan Am was up 1/8 to 4 3/8.
Otherwise, brokers said the rise of the Dow Jones industrial index to the 2,700 level this week prompted a tug-of-war between buyers and traders intent on cashing in some of the market’s recent gains.
The Dow has come within striking distance of the closing peak of 2,722.42 it reached on Aug. 25, 1987. Most other, broader measures of stock price trends have already surpassed their 1987 peaks this summer.
Declining issues outnumbered advances by about 4 to 3 in nationwide trading of New York Stock Exchange-listed stocks, with 636 up, 876 down and 501 unchanged.
Volume on the floor of the Big Board came to 209.90 million shares, against 200.34 million in the previous session. Nationwide, consolidated volume in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 246.44 million shares.
Losers among the blue chips included International Business Machines, down 1 1/8 at 117 1/8; Coca-Cola, down 7/8 at 66 5/8; American Telephone & Telegraph, down 1/4 at 40 1/8, and Pfizer, down 3/8 at 64 1/4.
Anchor Glass led the active list, up 7 1/2 at 19 3/4. Vitro SA of Mexico offered $20 a share to acquire the company.
Stock prices closed broadly higher in Tokyo on Wednesday after a spurt of futures-related program buying capped a day of thin and sluggish trade. The key 225-share Nikkei index gained 99.79 points to close at 34,859.27.
In London, the Financial Times-Stock Exchange 100-share index was up 12.3 points at 2,360.4.
Credit
Bond prices tumbled after a federal refinancing auction that analysts termed disappointing and a key interest rate shot higher.
The Treasury’s bellwether 30-year bond was off 23/32 point, or $7.19 per $1,000 face value. Its yield, which moves inversely to its price, rose to 8.14% from 8.08% late Tuesday.
Credit market strategists said a sharp rise in the federal funds rate, the interest rate banks charge each other for overnight loans, indicated the Federal Reserve did not plan to ease interest rates for the moment.
The rate was quoted at 9.50%, up from 8.935% late Tuesday.
Analysts said it was the first time the funds rate, a key interest rate barometer since it is set daily by the market, had broken 9% in two weeks.
The high rate came on a settlement day, when banks have to settle reserve requirements with the Fed and often must borrow large amounts. The federal funds rate is often unstable on settlement days.
But Robert Brusca, chief economist with Nikko Securities Co. International Inc., said the Fed did nothing to halt the upward drift of the rate, indicating it did not plan to ease interest rates any time soon.
In the secondary market for Treasury securities, prices of short-term government issues were 1/16 point to 5/32 lower, intermediate maturities ranged from 3/16 point to 1/2 point lower, and long-term issues were down 17/32 point to 21/32 point, according to Telerate Inc., a financial-information service.
The movement of a point is equivalent to a change of $10 in the price of a bond with a $1,000 face value.
The Shearson Lehman Hutton daily Treasury bond index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, slumped 3.19 to 1,184.17.
In corporate trading, industrials also lost ground. Moody’s investment grade corporate bond index, which measures total return on a portfolio of 80 corporate bonds with maturities of five years or longer, fell 0.16 to 330.83.
Yields on three-month Treasury bills fell to 8.19% as the discount edged down 8 basis points to 8.01%. Yields on six-month bills fell to 8.02% as the discount fell 6 basis points to 7.62%. Yields on one-year bills fell to 8.01% as the discount fell 1 basis point to 7.55%.
Currency
The dollar turned narrowly mixed against key foreign currencies in sluggish trading.
Gold prices were also mixed. On the Commodity Exchange in New York, gold bullion for current delivery rose to $366.90 an ounce from $366.20 late Tuesday. Republic National Bank of New York quoted a late bid for gold at $366 an ounce, up $1.70.
Currency dealers said concerns of slow economic growth brought a soft tone to the market.
The Federal Reserve released its regular bank survey of economic conditions, known as its “beige book,” on Wednesday, and that showed the economy was still growing but at a slower pace.
In Tokyo, where trading ends before Europe’s business day begins, the dollar fell 0.40 yen to a closing 138.85 yen. It traded at 139.13 yen in London and at 138.945 yen in New York, up from 138.865.
The dollar rose against the British pound in London. The pound fell to $1.6170 from $1.6250 late Tuesday. Sterling fetched $1.6625 in New York, up from $1.6255.
Gold traded at a bid price of $365.75 an ounce in London, up from $365.45 late Tuesday. In Zurich gold closed at a bid price of $365 an ounce, down from $365.85.
Silver prices headed lower. On New York’s Comex, silver bullion for current delivery fell to $5.155 an ounce from $5.156. Silver was bid at $5.15 an ounce in London, down 1 cent.
Commodities
Corn futures were lower, but soybeans and wheat prices finished higher as traders hewed to narrow ranges in advance of a much-anticipated U.S. Department of Agriculture survey of crop production for the year.
On other markets, sugar futures surged on rumors that India was in the market for as many as 300,000 tons; heating oil led a modest run-up in the petroleum futures complex, and frozen pork belly prices continued sliding in the face of historically high inventories.
Corn came under pressure with the opening bell at the Chicago Board of Trade because of the unusually high crop production estimate--7.72 billion bushels--released after the close of trading Tuesday by influential private forecaster Conrad Leslie.
Although Leslie’s forecast for soybeans was high as well--1.95 billion bushels--most traders apparently felt that was discounted during the late wave of selling Tuesday that dragged November soybeans to yet another contract low.
Traders tested the contract low at $5.62 again early Wednesday. After support held above that mark, many traders squared up their positions and headed to the sidelines to await today’s government report.
Wheat settled 1.5 cents to 5 cents higher, with the contract for delivery in September at $3.95 a bushel; corn was 0.5 cent to 2 cents lower, with September at $2.23 a bushel; oats were 1.25 cents lower to unchanged, with September at $1.36 a bushel, and soybeans were 1.50 cents to 9 cents higher, with August at $5.94 a bushel.
Rumors of a big purchase by India, which some traders speculated may already have taken place, pushed sugar futures prices above 14 cents a pound at mid-session.
Late profit taking helped trim the gains, however, and sugar finished 0.05 cent to 0.26 cent higher on the New York Coffee, Sugar and Cocoa Exchange, with October at 14.07 cents.
An American Petroleum Institute report released after Tuesday’s trading showed a substantial drawdown in heating oil supplies last month and that lifted the entire complex.
Crude oil was 9 cents to 14 cents higher at the New York Mercantile Exchange, with September at $18.21 a barrel; heating oil was 0.66 cent to 0.96 cent higher, with September at 49.43 cents a gallon, and unleaded gasoline was 0.14 cent to 0.40 cent higher, with September at 50.58 cents a gallon.
Livestock futures were mostly lower, while pork futures were sharply lower at the Chicago Mercantile Exchange.
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