Dow Off 27.74 as Rumors Sink Market
The stock market yielded to a late-afternoon barrage of selling Wednesday, sending the Dow Jones industrial index below 2,700 for the first time in three weeks.
Brokers attributed the selloff partly to rumors, which were quickly denied, that a major brokerage firm faced large losses from a position in junk bonds.
The Dow Jones index of 30 industrials fell 27.74 to 2,679.52, closing below 2,700 for the first time since it stood at 2,678.11 on Aug. 23.
Declining issues outnumbered advances by about 5 to 3 in nationwide trading of New York Stock Exchange-listed stocks, with 555 up, 912 down and 526 unchanged.
The market’s drop in the last hour of trading came as rumors spread that Merrill Lynch & Co. was sustaining losses from holdings in bonds of a unit of Campeau Corp., which is undergoing a financial restructuring that includes plans to sell its Bloomingdale’s department store chain.
Merrill Lynch denied that it faced any losses in the junk bond sector and said it owned no bonds related to Campeau. But Merrill stock dropped 1 3/8 to 32 7/8.
Big Board volume totaled 175.33 million shares, up from 142.14 million on Tuesday. Nationwide, consolidated volume in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 208.69 million shares.
In Tokyo, investors afflicted with interest rate jitters let the key 225-share Nikkei index slip 45.94 to close at 34,286.94 after surging 219.22 on Tuesday.
In London, the Financial Times-Stock Exchange 100-share index closed at 2,401.5, up 3.9.
Credit
Prices of long-term Treasury bonds and corporate junk bonds fell in a “flight to quality” that sent money into safer short-term Treasury securities.
The Treasury’s benchmark 30-year bond fell 15/32 point, or nearly $5, per $1,000 face amount. Its yield climbed to 8.14% from 8.09% late Tuesday.
The federal funds rate, the interest on overnight loans between banks, was quoted at 8.8125%, down from 8.875% late Tuesday.
Currency
The dollar declined against all key foreign currencies in quiet trading. Gold prices rose slightly after falling overseas.
On the New York Commodity Exchange, gold bullion for current delivery settled at $359.90 an ounce, up 40 cents from Tuesday. Republic National Bank’s late quote was $358.70, up 20 cents.
In Tokyo, the dollar fell to 146.70 Japanese yen from 146.73 yen Tuesday. It traded at 146.90 yen in London, and at 146.40 yen in New York, down from 146.905.
In London, the pound rose to $1.5530 from $1.5470 late Tuesday. Sterling fetched $1.5585 in New York, up from $1.5485.
Gold traded at $358.50 in London late Wednesday, down from $358.75 Tuesday, and in Zurich, Switzerland, fell to $358.25 from $358.55. In Hong Kong, gold closed unchanged at $359.93.
Commodities
Prices of cotton futures skyrocketed on the New York Cotton Exchange, climbing as much as 2 cents a pound, the permitted daily limit, on fresh signs of shrinking world supplies.
On other markets, grain and soybean futures fell steeply, most energy futures advanced, and precious metals, livestock and meat futures were mixed.
Cotton futures settled 1.13 to 2 cents higher, with the contract for delivery in October at 73.77 cents a pound.
The rally was rooted partly in Tuesday’s Agriculture Department crop report, which painted an ultimately bullish scenario for cotton although it was not apparent at first blush.
Grain and soybean futures fell sharply on the Chicago Board of Trade in selling sparked by a higher 1989 wheat crop estimate and expectations for an increase in 1990 wheat acreage.
