Dow Drops 13.23; Traders Grow Wary Over Interest

The stock market fell in generally lackluster trading today amid continued uncertainty about interest rates.

The Dow Jones average of 30 industrials fell 13.23 points to 2,688.78.

Declining issues outnumbered advancers by about 3 to 2 on the New York Stock Exchange, with 897 issues up, 577 down and 479 unchanged.

Big Board volume totaled 147.27 million shares, against 153.77 million in the previous session.

The NYSE’s composite index lost 1.08 to 190.26.

At the American Stock Exchange, the market value index fell 1.46 to 373.64.

Analysts said computerized trading strategies helped push stock prices lower in the final hour of trading.

Stocks came under pressure from the opening as investors took profits after the market’s recent gains. The Dow had gained nearly 70 points in the last five trading sessions.

Analysts said the stock and bond markets largely ignored reports on third-quarter gross national product and corporate profits.

Larry Wachtel, analyst with Prudential-Bache Securities Inc., said investors were focusing on the current quarter.

“As far as the market is concerned, that is dated material,” Wachtel said. “We now know the economy is floundering and corporate profits are floundering.”

Bank stocks came under pressure today after Southwest Bank of St. Louis announced that it was raising its prime rate back to 10.5% from 10% after cutting it three weeks ago.

Some analysts said, however, that the market’s sluggishness is merely a pause after the recent run-up in stock prices and before the start of a pre-Christmas rally.

“It’s two days overdue,” said Ralph Bloch, chief market analyst with Raymond, James & Associates in St. Petersburg, Fla.

Bond prices posted minor losses early today amid disappointment about the chances for an imminent cut in interest rates; analysts believe that the GNP report will not cause the Federal Reserve Board to alter its cautious approach to credit policy.

The central bank is expected to wait for clear signs of substantial economic weakness before loosening its hold on credit, which would lead to lower interest rates.

The Treasury’s benchmark 30-year bond dropped 5/32 point, or less than $1.50 for every $1,000 face amount. It yield, which rises when the price falls, increased to 7.92% from 7.90% late Tuesday.

Market analyst Jack Barbanel of First Global Asset Management Inc. said the Commerce Department’s revised estimate of economic growth in the third quarter was close to expectations.

“I think they’re going to take an extremely cautious approach to lowering interest rates,” Barbanel said.

He said he does not attach much significance to an increase in the federal funds rate today, attributing its movement to technical factors. The rate was quoted at 9 1/8% this morning, up from 9% late Tuesday.

Analysts watch the fed funds rate for clues about the central bank’s policy intentions. Last week the markets apparently misinterpreted a drop in the rate to mean that the Fed was moving aggressively to encourage interest rate declines.

The federal funds rate is the interest that banks charge each other for short-term loans, and the Fed can drive the borrowing charge higher or lower by arranging short-term securities sales or purchases that affect the amount of money available in the banking system.

Today is the last day of a two-week reserve maintenance period and banks were trying to acquire funds to meet reserve requirements. This could account for the rise in the closely watched rate.

In the secondary market for Treasury securities, prices of short-term governments were unchanged to 1/32 point lower, intermediate maturities fell 1/32 point to 3/32 point and long-term issues were down by 1/8 point to 5/32 point, according to the Telerate Inc., financial information service.

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

The Shearson Lehman Hutton daily Treasury bond index, which measures price movements on outstanding Treasury issues with maturities of a year or longer, declined 0.58 to 1,193.22.