Dow Drops 7.68 as Traders Pay Little Heed to Panama

The stock market posted a small loss today, registering no strong reaction to the U.S. military action in Panama.

The Dow Jones average of 30 industrials dropped 7.68 to 2,687.93, extending its loss over the last five sessions to 73.16 points.

Advancing issues nosed out declines in the overall tally on the New York Stock Exchange, with 763 up, 740 down and 482 unchanged.

Big Board volume totaled 176.52 million shares, against 186.06 million in the previous session.

The NYSE’s composite index edged up .14 to 189.54.

Analysts said investors were cautiously watching the situation in Panama but apparently not viewing it as any cause to make big changes in their strategies.

They said prospective economic effects of the confrontation, if any, remain unclear.

At the same time, brokers said, stock traders appeared to draw only brief encouragement from the Commerce Department report that the gross national product grew at a 3% annual rate, after adjustment for inflation, in the third quarter of the year.

Economists’ projections remained gloomy about results to be posted in the fourth quarter and the early stages of 1990.

Bond prices rose in early trading today as traders said the Federal Reserve added money to the banking system in a long-awaited signal that it might lower interest rates.

The Treasury’s benchmark 30-year bond jumped 1/4 point, or $2.50 per $1,000 in face amount, by midday. Its yield fell to 7.81% from 7.83% late Tuesday.

The key federal funds rate, the interest banks charge each other for overnight loans, dropped to 8 7/16% from about 8 1/2% late Tuesday. Analysts said they expected a target of 8 1/4% for the rate.

Economists have expected the Federal Reserve to ease its monetary policy to stimulate the sagging economy. The Fed had not added any reserves to the banking system with the federal funds rate trading below 8 1/2% since late November.

“I think they wanted to give the markets a clear-cut sign,” said Kevin Flanagan, money market economist with Dean Witter Reynolds Inc.

Earlier today, the credit markets showed little reaction to the U.S. military intervention in Panama. Bond prices normally rise in times of instability as investors transfer money to long-term fixed investments like bonds.