Dow Falls 77 in New Drubbing : Interest Rates Fan the Fears

The stock market took another drubbing today, resuming its early-1990 slide amid worries about the outlook for corporate profits and interest rates.

The Dow Jones average of 30 industrials fell 77.45 to 2,600.45, for its largest one-day point loss since it took a 190-point drop last Oct. 13.

Today’s slide was the Dow’s 10th worst point drop.

In 14 sessions since the average began the new year by hitting a record high, it has dropped 209.70 points, or 7.47%.

Declining issues swamped advances by more than 5 to 1 on the New York Stock Exchange, with 262 up, 1,337 down and 363 unchanged.

Big Board volume totaled 148.38 million shares, against 172.26 million in the previous session.

The NYSE’s composite index slumped 4.36 to 183.20.

Analysts said traders remained uneasy about weak corporate earnings reports for the fourth quarter of last year, as well as about the recent upturn in open-market interest rates.

The Federal Reserve is seen as facing an increasingly difficult set of choices in setting monetary policy to stave off a recession while trying to keep inflation at bay.

Alan Greenspan, the Fed’s chairman, will be making several appearances before congressional committees in the near future.

Wall Streeters will be watching closely to see what positions he might take on such matters as the risk rising worldwide interest rates might pose for the business outlook.

Bond prices slipped slightly in listless trading early today.

The Treasury’s benchmark 30-year bond fell 9/32 point, or $2.81 per $1,000 face amount, while its yield, which rises when prices fall, rose to 8.29% from 8.26% late Friday.

In the secondary market for Treasury bonds, prices of short-term governments fell 1/32 to 3/32 point, intermediate maturities fell 3/32 to 5/32 point and long-term issues were down 1/4 to 9/32 point, according to the Telerate Inc. financial information service.

He said the market was still reacting this morning to a report last week that two Federal Reserve Board governors do not believe that the Fed should ease interest rates. Lower interest rates are good for the bond market because they increase the value of the fix-return investments.

The market was awaiting two new government bond issues this week, traders said. The Resolution Funding Corp., the agency in charge of raising money to fund the government’s savings and loan bailout, plans to auction $5 billion in bonds Tuesday, and the Treasury is to auction $10 billion worth of two-year notes on Wednesday.

The Shearson Lehman Hutton daily Treasury bond index, which measures price movements on outstanding Treasury issues with maturities of a year or longer, fell 0.86 to 1,170.91.

Yields on three-month Treasury bills fell to 7.96% as the discount fell 2 basis points to 7.71%. Yields on six-month bills fell to 7.97% as the discount fell 1 basis point to 7.58%. Yields on one-year bills fell to 7.59% as the discount fell 1 basis point to 7.42%.

A basis point is one-hundredth of a percentage point. The yield is the annualized return on an investment in a Treasury bill. The discount is the percentage that bills are selling below the face value, which is paid at maturity.

The federal funds rate, the interest on overnight loans between banks, was quoted at 8 3/16%, up from 8 1/8% late Friday.