FINANCIAL MARKETS : STOCKS : Traders Ignore Tokyo Plunge; Dow Slides 13
Wall Street stocks fell moderately Wednesday, showing little worry over a huge drop on the Tokyo Stock Exchange and early morning news that U.S. consumer prices posted their biggest monthly jump in more than seven years.
The Dow Jones index of 30 industrials closed down 13.29 points at 2,583.56, following a steep drop of 39 points on Tuesday.
But the Dow was off more than 30 points earlier in the day, and analysts noted that the selloff was moderate in comparison to the Japanese decline.
Declining issues outnumbered advances in nationwide trading of New York Stock Exchange-listed stocks, with 577 up, 963 down and 455 unchanged.
Big Board volume totaled 159.24 million shares, up from Tuesday’s 147.30 million.
A larger-than-expected 1.1% rise in consumer prices last month, spurred by higher energy and food costs, added to the selling pressure.
The jump in inflation, the largest since a 1.1% increase in June, 1982, reinforced the perception that interest rates will stay put for now, because a move toward easier credit would fuel inflation.
Nevertheless, bond prices rebounded by late morning, offering support to stocks.
“The catalyst was the bond market,” said George Pirrone, senior trader at Dreyfus Corp.
Pirrone said the stock market’s resilience was impressive, but he added, “I don’t think we should be lulled into thinking the downside is over.”
The Dow has fallen 8.1% since hitting an all-time high Jan. 2.
Most analysts remain cautious about the stock market’s short-term prospects while interest rates continue to rise in West Germany and Japan. “The driving force is the interest rate front,” said Dennis Jarrett, chief market strategist at Kidder, Peabody & Co.
Airline stocks were among the more notable winners of the day as analysts issued favorable recommendations for two companies.
AMR gained 1 1/8 to 56 3/4, while USAir closed unchanged. Related stocks benefited, with Delta Air Lines rising 2 5/8 to 65 5/8 and volatile UAL adding 5 1/8 to 132 1/4.
Digital Equipment dropped 1 1/8 to 72 7/8 after it said it may have a loss in its fiscal third quarter.
Kimberly-Clark fell 2 3/8 to 64 3/4 following the paper company’s cautious assessment of earnings prospects.
Perkin-Elmer, which said it is buying back up to 23% of its outstanding stock, fell 1 1/8 to 23 3/8.
CREDIT Bonds Rebound as Buyers Seek Haven Bond prices finished higher despite the worse than expected inflation news, bouncing back from a sharp drop in the previous session.
The Treasury’s key 30-year bond, which fell 1 5/8 points Monday, gained 5/16 point, or about $3 for every $1,000 in face value. Its yield, which falls when the price rises, dipped to 8.64% from 8.66% late Tuesday.
Tuesday’s big decline in bond prices was blamed on worries that interest rates are headed higher around the world.
Brokers said Wednesday’s rebound reflected internal market conditions. They also said some investors were switching to bonds from investments such as stocks, which suffered another decline.
Analysts said the bond market shrugged off the consumer price report largely because the jump was caused by one-time food and fuel increases from frigid weather.
The federal funds rate, the interest rate banks charge each other on overnight loans, was quoted at 8.31%, up from 8.25% late Tuesday.
CURRENCY Dollar Hangs Tough in Jittery Trading The dollar ended mostly higher in thin, nervous trading following a mixed performance overseas.
The dollar started out higher in Japan, but fell back in Europe as dealers became unnerved by sharply falling stock prices in Tokyo and a bond market rally in West Germany.
Those worries, however, failed to have a major impact on traders in New York.
“I don’t think there’s any incentive to buy or sell,” said Earl I. Johnson of Harris Trust & Co. in Chicago. “The market needs more information on the U.S. economy.
“There’s (also) a lot of uncertainty about a monetary union in Germany and nervousness about firmer interest rates abroad.”
The dollar was quoted at 1.6645 West German marks in London, down from 1.6748 marks, and 1.6725 marks in New York, up from 1.66835 marks Tuesday.
But the dollar weakened against the British pound, largely due to comparatively higher interest rates in Britain. Sterling bought $1.7145 in London, up from $1.7040 late Tuesday, and $1.7125 in New York, up from $1.7115.
In Tokyo, where trading ends before Europe’s business day begins, the dollar rose 0.57 yen to a closing 145.15 yen. The dollar traded at 145.30 yen in London, and at 145.50 yen in New York, up from 145.155 yen.
Meanwhile, gold prices rose in New York and Hong Kong but slipped in Europe.
On New York’s Commodity Exchange, gold bullion for current delivery settled at $418 an ounce, down $1.90 from late Tuesday. Republic National Bank in New York quoted a late bid for gold at $417.80 an ounce, off $2.10.
COMMODITIES Live Cattle Futures Fall on Supply News Live cattle futures plummeted the permitted daily limit on the Chicago Mercantile Exchange in a delayed reaction to last week’s government report showing a larger than expected number of cattle being fed for slaughter.
On other commodity markets, feeder cattle futures also fell sharply while pork futures advanced; coffee futures rose sharply; grains and soybeans were higher; precious metals retreated, and energy futures were mixed.
Analysts attributed the selloff in cattle futures to sluggish beef sales and bearish interpretations of the Agriculture Department’s monthly cattle-on-feed report, which was released Friday.
The report showed an 11% increase over the previous year in cattle placements onto feedlots during January in the seven largest cattle-producing states.
Thomas Morgan, president of Sterling Research Corp. in Arlington Heights, Ill., said the January feedlot placements were the largest since 1974 and 25% above the 10-year average.
Tables begin on D10
