Junk Bond Rumor Blamed as Dow Closes Down 27.74

A late-afternoon spate of selling drove stock prices lower today, pushing the Dow Jones industrial average below 2,700 for the first time in three weeks.

The Dow Jones average of 30 industrials fell 27.74 points to 2,679.52.

Declining issues outnumbered advances by about 5 to 3 on the New York Stock Exchange, with 549 up, 908 down and 512 unchanged.

Big Board volume totaled 175.23 million shares, up from 142.14 million in the previous session.

The NYSE’s composite index lost 1.59 to 192.29.

Brokers attributed the sell-off to rumors, which were quickly denied, that a major brokerage firm was facing losses from a position in high-yield junk bonds.

Analysts said traders were hoping for some positive news later in the week to serve as a market stimulus.

Monthly data on the producer price index of finished goods, due out Friday, is expected to show no change or a modest decline in that measure of inflationary pressures.

Some observers said it may take something more surprising to stir stocks out of their recent torpor.

And with prices still not far below the record highs they reached a couple of weeks ago, talk persisted on Wall Street that the market might be heading for a “correction,” or period of retrenchment.

Light Early Trading

Bond prices were narrowly mixed as light trading continued this morning.

The Treasury’s benchmark 30-year bond was up 1/32 point, or less than $1 per $1,000 face amount, around midday. Its yield was unchanged from late Tuesday at 8.09%.

In the secondary market for Treasury securities, prices of short-term governments were unchanged to up 1/6 point, intermediate maturities were about 1/16 point and long-term issues ranged from down 1/32 point to up 1/32 point, according to the Telerate Inc. financial information service.

The Shearson Lehman Hutton daily Treasury bond index, which measures price movements on outstanding Treasury issues with maturities of a year or longer, was up 0.15 to 1,181.14.