STOCKS : Bond Auction Still a Worry; Dow Off 16.21
The stock market fell in thin trading Tuesday, weighed down by worries that this week’s government borrowing binge will drive interest rates higher.
The Dow Jones index of 30 industrials, which had risen 19.82 on Monday, lost 16.21 to close at 2,606.31. The market’s best-known indicator had been down 25 points with about two hours left in the session.
Declining issues outnumbered gainers in nationwide trading of New York Stock Exchange-listed stocks, with 578 up, 909 down and 499 unchanged.
Big Board volume totaled 134.07 million shares, up slightly from the 130.95 million shares traded Monday in the slowest session this year.
The key Dow index hovered near the psychologically important 2,600 mark for much of the session, rising above it on the strength of futures-related buying late in the session.
“The market has been doing the dance of death around 2,600,” said Alfred Goldman, director of technical research at A. G. Edwards & Sons.
Pan Am, the most active Big Board issue, was off 1/8 to 3 5/8. Earlier, it had traded as high as 4 on continued speculation of a possible deal with Northwest Airlines.
But when its board ended a meeting Tuesday afternoon, Pan Am said it would have no announcement. A union official said Sunday that Pan Am was considering a deal with the parent of Northwest Airlines.
Also on the active list, IBM rose 1 3/8 to 101, Bank of New England rose 1 to 6 3/4, Philip Morris lost 5/8 to 38 1/4 and General Electric rose 1/4 to 62.
Tokyo stock prices closed firmer but off their highs after profit taking replaced bouts of index-linked buying by investment trust funds. The key 225-share Nikkei index added 35.42 to close at 37,666.83
Stocks finished sharply lower in London, as an early drop on Wall Street sent British shares spiraling down. The Financial Times 100-share index skidded 27.3 to 2,321.1.
CREDIT Concern Over Long Bonds Hurts Prices Bond prices also fell as traders fretted over whether Wall Street would be able to absorb the load from government auctions of long-term securities in the face of possibly slack foreign interest.
The Treasury Department’s benchmark 30-year bond declined 17/32 point, or $5.31 per $1,000 face amount. Its yield climbed to 8.58% from 8.53% late Monday.
Joel Kazis, head of government trading for Smith Barney, Harris Upham & Co., said the three-year note auction appeared to benefit from investors switching money from the stock market to the more secure government notes. Buying by Japanese interests also was strong.
A glut of Treasury issues could depress bond prices and force the Treasury to offer higher interest rates to stimulate demand. The debt securities are sold at auctions four times a year to finance the federal deficit and keep the government running.
The federal funds rate, the interest banks charge each other on overnight loans, was quoted at 8 3/16%, down from 8 1/4% late Monday.
CURRENCY Mark in Spotlight; Dollar Ends Mixed The dollar ended mixed against other major currencies as buyers were preoccupied with the West German mark.
Currency dealers described dollar trading as uneventful because the mark has been the center of attention. The mark has been buoyed by developments in Eastern Europe that are expected to benefit West Germany economically.
“It’s more of a mark-driven market right now rather than a dollar-driven market,” said Thomas Palladino, a dealer at the Amsterdam Rotterdam Bank’s New York office. “The sentiment still seems to be in favor of selling the dollar but more so of buying the mark.”
The dollar ended the day in New York at 1.65605 West German marks, down from 1.6590 marks Monday. That was below the closing level in Europe of 1.6570 marks, which was down from 1.6670 in Europe late Monday.
COMMODITIES Profit Taking Snaps Gold Futures’ Rally Prices of gold futures slipped Tuesday on New York’s Commodity Exchange amid profit taking, ending a three-day rally that peaked when the contract for April delivery failed to find support above $430 an ounce.
Silver futures also turned lower.
On other commodity markets, oil futures were mostly lower; orange juice futures rebounded; grains and soybeans were mixed; and livestock and meat futures were mostly lower.
Gold futures settled $1.10 to $1.50 lower, with the contract for delivery in February at $421.30 an ounce; silver finished 2.3 to 2.4 cents lower, with March at $5.33 an ounce.
Gold for February delivery had surged a total of $10 an ounce in the three previous sessions, mainly on supportive chart signals that defied the anti-inflationary rise in interest rates, a bearish fundamental factor.
Analysts also noted that gold’s strength had not been confirmed by similarly sharp increases in silver and platinum prices.
The gold rally passed a milestone Monday when the heavily traded contract for April delivery moved above $430 an ounce, but confidence in the market then waned.
