Interest rate jitters and profit taking continued to pressure the stock market Wednesday, pushing prices lower.
The Dow Jones index of 30 industrials fell 13.23 points to 2,688.78.
Losing issues outpaced gainers by about 3 to 2 in nationwide trading of New York Stock Exchange-listed stocks, with 892 issues down, 595 up and 484 unchanged.
Trading activity was generally sluggish throughout the session. Big Board volume totaled 147.27 million shares, down from 153.77 million in Tuesday’s session.
Bank stocks took the biggest hit, reflecting disappointment over the recent mixed signals by the Federal Reserve as well as the decision by Southwest Bank of St. Louis to raise its prime rate back to 10.5%. The small Midwestern bank, which often leads prime rate moves by bigger banks, had cut the rate to 10% recently.
“This certainly doesn’t bode well for the short term,” said Jack Baker, head of block trading for Shearson Lehman Hutton Inc.
The Fed confused the financial markets by first letting key short-term interest rates fall last week, which led analysts to conclude that the central bank was easing credit to stimulate the economy. But Monday, the Fed sent a strong signal that it wasn’t easing credit. Stock prices nonetheless had advanced in the two sessions before Wednesday’s fall.
The market came under pressure at the opening bell Wednesday from profit takers eager to cash in on the recent gains. A handful of blue chip issues led a narrow rally by midday, but the broader market did not follow, and the gains were quickly erased.
Two separate reports that showed an upward revision in the gross national product and lower corporate profits in the third quarter were generally overlooked by investors.
Among actively traded issues on the NYSE, Great Western Financial fell 1 1/8 to 18 1/8, reflecting the news that it expects to report a fourth-quarter loss due to difficulties with its commercial real estate loans.
BankAmerica lost 1 1/4 to 27 5/8, Chemical Bank slipped 1/2 to 32 1/8, and Penn Central dropped 1/8 to 25 5/8. Exxon declined 7/8 to 47, American Express slid 1/8 to 35 1/4, and UAL lost 5 1/2 to 160.
On the plus side, Chevron rose 5/8 to 68 3/8, Philip Morris gained 3/8 to 41 7/8, and Union Carbide advanced 1/4 to 24 3/4.
The Tokyo Stock Exchange’s key index, setting a record high for the sixth-consecutive trading day, closed above 37,000 for the first time Wednesday. The 225-share Nikkei index gained 36.16 points to close at 37,021.46. The index closed above 36,000 for the first time on Nov. 21, when it ended at 36,059.87.
Prices also finished generally higher in thin trading on London’s Stock Exchange with few substantive developments to affect the overall market. At the close, the Financial Times 100-stock index had gained 13.6 points to 2,255.6.
Bond Prices Drop Amid Interest Jitters Bond prices also gave ground amid pessimism about the possibility that interest rates will fall any time soon.
The Treasury’s benchmark 30-year bond fell 9/32 point, or $2.50 for every $1,000 face amount. Its yield, which rises when the price falls, increased to 7.93% from 7.90% late Tuesday.
Analysts said the bond market’s decline reflected signs of stability in the government’s latest report on economic activity in the July through September period. They said the Federal Reserve won’t likely push interest rates lower until it sees evidence of further weakening in the economy.
The federal funds rate, the interest charge on short-term loans between banks, was quoted at 8.675% late Wednesday, down from 9% late Tuesday.
Dollar Mixed, Mark Grabs Spotlight The dollar turned in a mixed performance as the West German mark continued to dominate the foreign exchange markets.
“The dollar was relatively neutral” as most currency traders focused on the mark, said Ronald Holzer, chief dealer with Harris Trust & Co. in Chicago.
The mark fell amid profit taking in response to a surge since East Germany opened the Berlin Wall Nov. 9. The opening of the wall raised expectations that West German industry would benefit from the relaxation of East-West tensions.
The Commerce Department’s upward revision of the gross national product to a 2.7% annual rate in the third quarter gave the dollar some support but tended more to prompt selling of the mark, Holzer said.
The dollar gained against the West German currency in New York, rising to 1.7875 marks from 1.7770 late Tuesday. In earlier Frankfurt trading, the dollar closed at 1.7825 marks, down from 1.7880.
The British pound edged up to $1.5678 in New York from $1.5670 late Tuesday, and sterling also rose earlier in London, closing at $1.5655, compared to late Tuesday’s $1.5625.
In Tokyo, the dollar fell 0.12 Japanese yen to a closing 143.53 yen. Later, in London, it fell further to 143.15 yen and in New York, it was quoted at 142.855 yen, down from 143.20.
Gold Futures Prices Continue to Slide Gold prices fell sharply on New York’s Commodity Exchange, steepening a slide that represents either a temporary setback in a bull market or gold’s retreat from its highest point in nearly a year.
“I think the verdict is still out on that one,” said John Jonat, a trader with Deak International Inc., a New York-based dealer of precious metals and foreign currencies.
On other markets Wednesday, pork belly futures fell the limit for the second straight day; energy futures advanced, and grains and soybeans were mixed.
Gold futures settled $3.90 to $4 lower on the Comex, with the contract for delivery in December down $4 at $409.50 an ounce. Silver fell 9.5 to 9.7 cents, with December settling at $5.60 an ounce.
The December gold contract has dropped more than $10 since Friday, when it peaked at $419.70.
Jonat said he was surprised gold fell so sharply after Tuesday’s very slight loss, which he had taken as a sign that a wave of profit taking had passed.
Stephen Platt, a metals analyst with Dean Witter Reynolds Inc. in Chicago, said the dollar’s gains following its recent slide probably contributed to Wednesday’s decline in gold.
Analyst Don Tierney of Stanley Bell & Co., a New York-based futures brokerage, blamed the decline on selling ahead of the first notice day for the December gold contract.
Pork belly futures prices slammed down the 2-cents-a-pound daily limit for the second straight day on the Chicago Mercantile Exchange after the government announced that it had accepted bids for 920,000 pounds of pork bellies to be shipped to Poland as part of a food aid package.
The announcement follows last week’s announcement of a 280,000-pound government purchase, bringing to 1.2 million pounds the amount of bellies the government has bought to ship to Poland.