Soviet Report Shakes Dow; Index Off 10.14

A report that Mikhail S. Gorbachev may resign as Soviet Communist Party chief jolted the stock market today, sending it into wild gyrations and some traders to the sidelines.

Prices were so volatile shortly after 2 p.m. that traders at one investment brokerage stopped trading temporarily while the market calmed down.

But the Dow Jones average of 30 industrials, which fell immediately after the Gorbachev report, rebounded and then slipped again. It closed at 2,543.24, down 10.14 points.

Declining issues outnumbered advancers by nearly 3 to 1 on the New York Stock Exchange, with 1,155 issues down, 392 up and 427 unchanged.

Big Board volume totaled 186.03 million shares, against 150.77 million in the previous session.

The NYSE’s composite index fell 1.30 to 178.43.

At the American Stock Exchange, the market value index lost 4.04 to 345.50.

“Confusion is reigning supreme. Most professional traders are on the sidelines,” said Charles Jensen, chief technical analyst for MKI Securities Corp. in New York, as stock prices fluctuated during the day.

Jensen said that from one minute to the next prices soared and dropped.

“We haven’t seen a market of this kind for sometime. It’s pulsating, vibrating without any sense of direction,” Jensen said.

As in recent sessions, the key index moved in a wide range, having been up as much as 10 points near the opening and down 36 points in the afternoon. The dow index was down 16.89 points to 2,536.49 at 3 p.m.

Analysts said the news alternately hit the financial markets, currency markets and commodities and metals markets.

The report on Cable News Network that Gorbachev may resign as the head of the communist party fueled the stock futures market, which in turn drove the cash market.

Analysts said after the initial reaction, traders were attempting to get clarification on the impact of a possible resignation.

Before the report, interest rates and concern about financing for takeovers were the market’s chief worries.

Analysts said the market also interpreted as negative this morning’s remarks by Federal Reserve Chairman Alan Greenspan before the Joint Economic Committee in Washington D.C.

Greenspan said the probability of a recession is less than 50%, lower than previously anticipated, and that the current 4.5% inflation rate is “unacceptable.”

“Greenspan seemed to be signaling there would be no accommodation by the Fed on interest rates,” said Larry Wachtel, analyst with Prudential-Bache Securities Inc.

Bond prices fell in light early trading today, continuing a slide that began several days ago.

The Treasury’s bellwether 30-year bond was off around 1/4 point, or $2.50 per $1,000 face amount, by midday. Its yield, which moves inversely to the price, rose to 8.60% from 8.57% Monday.