Trade Deficit Jumps 31%; Dow Loses Ground, Off 18 : Blue Chips Had Been Down 63
Stocks retreated today following two of the wildest sessions on Wall Street since the October, 1987, market crash.
The Dow Jones average of 30 industrial stocks fell 18.65 points to 2,638.73 after spiking down as much as 63 points around 11:30 a.m. Broader market indicators also fell.
The Dow average had plummeted 190.58 points on Friday and bounced back with an 88.12-point gain on Monday, leaving investors groping for stable ground.
The Commerce Department handed the market some bad news today with its report that the merchandise trade deficit rose nearly 31% in August to $10.77 billion from a revised July deficit of $8.24 billion.
But analysts did not all agree that the big trade deficit was a major factor in today’s stock decline. Some noted that bonds and the dollar--which are most sensitive to bad trade figures--held up relatively well.
The dollar recovered after a sharp drop that followed the trade report, while bonds were mixed--an indication that investors were not seriously worried about worsening inflation and higher interest rates.
The Federal Reserve injected another $1.5 billion into the banking system today after adding $2 billion in reserves on Monday. Banks will be able to use the new reserves to make loans, including coming to the assistance of brokerage firms caught in a cash squeeze because of the drop in stock prices.
Stocks remain somewhat unstable after the drastic moves of the past two sessions, some analysts said.
“There’s much more going on in the stock market at the moment than the trade numbers,” said Lawrence A. Veit, international economist at Brown Brothers Harriman & Co.
“You’ll tend to see somewhat accentuated volatility this week and next,” said Giulio Martini, economist at Sanford C. Bernstein & Co.
In the overall New York Stock Exchange today, declining issues outpaced advances by almost 3 to 2. Volume on the New York Stock Exchange totaled a heavier-than-usual 224.07 million shares, with the heaviest action in the early going.
The NYSE’s composite index slid 0.87 to 188.89.
