FINANCIAL MARKETS : Dow Falls 14 on Eve of ‘Triple-Witching Hour’
The stock market extended its September slump Thursday in selling blamed on takeover debt worries and caution in advance of the quarterly “triple-witching hour.”
The Dow Jones index of 30 industrials, down 27.74 on Wednesday, dropped an additional 14.63 to 2,664.89.
In the eight sessions since Labor Day, the index has lost 87.20.
Declining issues outnumbered advances by close to 3 to 1 in nationwide trading of New York Stock Exchange-listed stocks, with 396 up, 1,108 down and 479 unchanged.
Analysts said the stock market remained unsettled by recent pressure on the market for high-yield junk bonds of companies carrying large debt loads.
The worries focused on the problems of Campeau Corp., which is trying to restructure its retailing empire to keep up with its debt obligations.
Woolworth Corp., a retailer that has been widely rumored as a buyout candidate, fell 3 1/4 to 64 3/4.
Airline stocks, a hot takeover group for most of the summer, also declined broadly. AMR lost 4 1/8 to 77 5/8, Delta Air Lines dropped 2 7/8 to 71 5/8, and UAL slipped 2 3/4 to 280 1/2.
Among other prominent issues recently talked up as potential takeover targets, Honeywell fell 2 3/4 to 82 1/2 and Eastman Kodak lost 5/8 to 48 1/8.
Some money evidently flowed out of those stocks into blue chips so big that they presumably had no takeover premiums built into their prices. American Telephone & Telegraph rose 1/4 to 40 1/4, International Business Machines added 3/8 to 115 3/4 and General Electric climbed 3/8 to 55 7/8.
Brokers also noted that traders were proceeding cautiously before the quarterly witching hour today involving a series of expiring stock index options and futures.
The government reported Thursday that retail sales increased 0.7% in August, slightly below most advance estimates. The news provided some support for U.S. Treasury securities, nudging interest rates a bit lower in that sector of the credit markets. But stocks got little benefit from those developments.
Circle K Corp. led the NYSE active list, down 3/8 at 7 3/8. The stock fell 1 3/4 on Wednesday, when the company said it had ended efforts to solicit takeover offers and suspended its dividend.
Big Board volume totaled 149.25 million shares, down from 175.33 million Wednesday. Nationwide, consolidated volume in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 177.83 million shares.
In Tokyo, stocks struggled to modest gains in thin trade as investors stuck to the sidelines ahead of U.S. trade and other economic data due out today, brokers said.
The 225-share Nikkei index climbed 114.94 to close at 34,401.88 after losing 45.94 on Wednesday.
Today is a national holiday in Japan, which is another reason that turnover was a thin 550 million shares against 600 million Wednesday.
Share prices closed sharply lower on London’s Stock Exchange, depressed by early losses on Wall Street.
The Financial Times-Stock Exchange 100-share index closed at 2,382.0, down 19.5. It finished at its session low and the market’s lowest close since Aug. 30.
Credit
Prices of Treasury and most corporate bonds rose, but the junk bond market continued to weaken.
Prices of government securities benefited from a report of unexpectedly soft retail sales, while the high-yield junk bond market sagged because of the financial problems at Campeau Corp.’s retail subsidiaries, Federated Department Stores Inc. and Allied Stores Corp.
The Treasury’s benchmark 30-year bond recovered 7/32 point, or $2.19 per $1,000 face amount. Its yield declined to 8.12% from 8.14% late Wednesday. The bond had lost about $5 per $1,000 in face amount Wednesday.
Bids for Federated and Allied junk bonds dropped, but there was little trading because holders of the bonds were unwilling to sell at the rock-bottom prices. Dealers said, for example, that Federated’s 16% senior subordinated debentures due in 2000 were trading at 50, meaning that they had lost half their value since issuance.
Federated and Allied disclosed Wednesday that they faced a cash crunch. Most junk bonds were down about 1/4 to 1/2 point, said Alan Schlesinger, head of junk bond trading at Donaldson, Lufkin & Jenrette Securities Corp.
The federal funds rate, the interest on overnight loans between banks, was quoted at 8 7/8%, compared to 8-13/16% late Wednesday.
Currency
The dollar rebounded to finish higher in choppy U.S. dealings after closing lower overseas.
Gold prices rose.
On the New York Commodity Exchange, gold bullion for current delivery settled at $360.50 an ounce, up 60 cents. Republic National Bank quoted a late bid of $359.35, up from $358.70.
Traders said the Bank of Japan entered the market overnight to sell a large amount of dollars, which pushed the U.S. currency lower overseas. Further, dealers in Europe moved to trim their dollar holdings before today’s release of U.S. merchandise trade figures for July.
But dealers at home used the impending Commerce Department report as a reason to buy dollars, pushing the currency higher in a seesaw session.
In Tokyo, the dollar closed at 145.85 Japanese yen, down from 146.70 yen. Later in London, the dollar traded lower at 146.60 yen. In New York, the dollar rose to close at 146.85 yen, from 146.40 yen Wednesday.
In London, one British pound cost $1.5582, up from $1.5530. But in New York, one pound cost $1.5540, cheaper than $1.5585 on Wednesday.
Gold closed in London at $362, up from $358.50. The late bid in Zurich, Switzerland, was $361.75, up from $358.25. Earlier in Hong Kong, gold closed at $359.85, up from $359.60.
Commodities
Copper for spot delivery on New York’s Commodity Exchange surged to a 4 1/2-month high as the market ignored a mining strike settlement in Chile and focused on continuing supply disruptions in other parts of the world.
On other markets, pork bellies rose the limit and grain futures rallied on news of a food-aid package to Poland; energy futures fell and precious metals were mixed.
Copper futures settled 1.5 to 4.9 cents higher, with the spot contract, for delivery in September, at $1.373 a pound, the highest settlement for spot copper contract on the Comex since April 28.
The settlement of a 2-week-old strike at Chilean Copper Co.’s El Salvador mine had been expected and caused little market reaction.
New reports regarding U.S. food aid to Poland boosted meat and grain futures in Chicago.
Frozen pork belly futures have risen for the past two weeks on expectations that the government will donate some of the burgeoning U.S. pork belly surplus to the Poles.
On the Chicago Mercantile Exchange, frozen pork bellies settled 1.93 to 2 cents higher, with February at 48.25 cents a pound; hog futures were 0.23 to .85 cent higher, with October at 40.57 cents a pound; live cattle were 0.07 cent lower to 0.50 cent higher, with October at 72.52 cents a pound, and feeder cattle were 0.10 to 0.50 cent higher.
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