Stocks Prices Slip as Traders Cash In Gains

Stock prices declined for the second straight session Wednesday in selling attributed to new worries about interest rates and uneasiness about pending and rumored buyouts.

The Dow Jones average of 30 industrials, which fell 6.08 Tuesday, dropped another 11.97 points to 2,773.36.

Declining issues outnumbered advancing ones more than 2 to 1 in nationwide trading of shares listed on the New York Stock Exchange.

The market got off to a shaky start after Japan announced a higher discount rate, a move that signaled concern about inflation and surprised traders.

Analysts said traders also found it hard to resist the temptation to cash in gains from the market’s rise to record highs last week and Monday.

The tendency to lighten up was apparently heightened by a dimming of hope that the Federal Reserve Board will relax its credit policy any time soon.

Interest rates, which had been dropping in recent days in anticipation of stimulus from the Fed, rose in Wednesday credit-market activity. Hope for lower rates had been one reason for the market’s recent robust gains.

“I would attribute this (market weakness) to (Fed Chairman Alan) Greenspan,” said James Andrews, head of institutional trading at Janney Montgomery Scott. “His remarks were absolutely negative, and people are just now realizing what he’s saying.”

High interest rates choke off investment and make stocks less attractive than bonds and other, more liquid assets such as money market funds.

Other analysts said the market was due for a pullback and that Greenspan’s comments just provided a timely excuse.

“I think the market was a little overly aggressively bought earlier this week, and this is a technical setback,” said Lewis Smith, a technical analyst at Bear Stearns.

On the mergers and acquisitions front, AMR shares fell 4 1/4, to 97 1/8, in active trading, on word that the company was asking for legislation to help it ward off investor Donald J. Trump’s takeover bid.

In other airline stocks, USAir Group fell 2 5/8, to 46 1/2, and Delta Air Lines was down 2 5/8, at 77 1/8.

Ramada Inc. fell 2 1/4, to 11. The company said it was taking off the market an offering of debt securities that had been part of its restructuring plan.

Gulf States Utilities, the most traded issue on the Big Board, tumbled 2 1/8, to 12 1/8. A Louisiana judge rejected the company’s attempt to raise electricity rates to cover $1.4 billion in costs associated with a nuclear power plant.

Losers among the blue chips included Philip Morris, down 1/4 at 45, American Telephone & Telegraph, down 1/2 at 42 1/2, International Paper, down 1 at 54 3/4, and International Business Machines, down 1/2 at 107 3/4.

Big Board volume was 164.07 million shares, up from 147.56 million in the previous session.

The surprise hike in Japan’s discount rate threw the Tokyo stock market for a loop, but it landed nearly right side up and investors said the market would be back on track after a few days. The Nikkei index of 225 key issues plunged 370.60 points on news of the rate rise, but closed just 136.28 points off, at 35,240.07.

In London, share prices closed unchanged, largely due to gains in key blue chip stocks rather than any change in sentiment about Britain’s high interest rates or the weak pound. The Financial Times 100-share index closed at 2,218.8, unchanged from Tuesday’s closing.

Credit

Bond prices declined Wednesday in dull trading.

The Treasury’s closely watched 30-year bond fell about 1/2 point, or $5 for every $1,000 in face value. Its yield, which rises when the price declines, jumped to 8.05% from 8.01% late Tuesday.

Analysts said some traders continued to take advantage of gains from last week’s rally, but there were no fresh developments to affect the market.

“Nothing is going on in our market,” said Elizabeth Reiners, a vice president at Dean Witter Reynolds Inc. “It doesn’t seem to want to move; it needs new information to move it one way or another.”

Market participants were looking forward to Friday’s scheduled government report on September wholesale prices as a potential factor in bond prices.

Traders are “looking with some apprehension” toward the report, said John Sebastian, executive vice president of Clayton Brown & Associates in Chicago. If the data show a resurgence of inflationary pressures, they could knock down bond prices, he said.

In the secondary market for Treasury bonds, prices of short-term government issues slipped 1/32 point to 1/16 point; intermediate maturities declined 3/32 point to 5/16 point and long-term issues fell 9/32 point to 1/2 point, according to figures from Telerate Inc., a financial information service.

Movement of one point is equivalent to a change of $10 in the price of a bond with a $1,000 face value.

The federal funds rate, the interest charged on overnight loans between banks, was quoted late in the day at 8.813%, down from 8.875% late Tuesday.

Commodities

Frozen pork belly futures climbed sharply on the Chicago Mercantile Exchange, boosted by stronger cash markets, shrinking supplies and bullish technical signals.

On other commodity markets, livestock, energy and precious metals were mostly higher and grain futures were mixed.

Frozen pork bellies settled 1.10 to 1.22 cents higher, with the contract for delivery in February at 47.72 cents a pound. The rally erased most of the losses of the three previous sessions.

Pork belly prices have been recovering slowly since early September. They slid to 18-year lows during the summer as supplies piled up in warehouses, partly due to declining consumption of bacon.

The government’s decision to add pork bellies to the U.S. program of food aid to Poland helped get the market moving again last month, as did a drop in retail prices for bacon that some consumers apparently found irresistible.

The Chicago Mercantile Exchange on Wednesday reported a 2.4-million-pound decline last week in supplies of pork bellies stored in warehouses outside of Chicago.

“As much as anything, the bellies are getting energy from fairly good out-movement,” said Dale Durchholz, an analyst with AgriVisor Services Inc. in Bloomington, Ill.

Live cattle futures settled 0.10 to 0.35 cent higher, with October at 73.20 cents a pound. Feeder cattle were 0.20 to 0.60 cent higher, with October at 83.15 cents a pound; live hogs were 0.30 cent lower to 0.40 cent higher, with October at 47.62 cents a pound.

Gold futures rose slightly. Silver made substantial gains on New York’s Commodity Exchange. Analysts said the silver price had been due for a correction since it fell 23 cents an ounce in the last four sessions.