STOCKS : Dow Slumps 13 on Fears Rates May Not Drop
Stock prices slipped on profit taking Wednesday for the second straight day, as investors began to reconsider prospects for lower interest rates.
The Dow Jones index of 30 industrials dropped 13.35 points to 2,911.65. It fell 10.19 on Tuesday.
Declining issues outnumbered advancers in nationwide trading of New York Stock Exchange-listed stocks, with 656 up, 872 down and 489 unchanged. Big Board volume totaled 164.02 million shares, down from Tuesday’s 199.72 million.
However, many over-the-counter stocks were higher. The NASDAQ composite index rose 0.35, to 464.96.
Analysts said traders were cashing in some of the gains from the market’s sharp rise of late. Investors also seemed leery of chasing after stocks as a few misgivings spread about the chances for any further drop in interest rates.
A Wall Street Journal article argued that the Federal Reserve didn’t appear in any hurry to loosen credit despite recent signs that economic growth had slowed.
Share prices were also hit near midday by rumors, later denied, of a large nuclear cloud over the Barents Sea in the Soviet Union. It raised fears about a possible new nuclear accident like the Chernobyl disaster. Reuters reported that a large cloud was found not to be man-made.
Energy stocks were mostly lower for the second day in a row on reports that Saudi Arabia was taking steps that put downward pressure on oil prices. Texaco fell 1 1/2 to 57 7/8, Occidental Petroleum lost 5/8 to 26 1/2, and Arco fell 2 to 116 1/4.
Many bank, S&L; and other financial stocks were higher, continuing a recent rally. HomeFed gained 3/4 to 31 3/4, Broad Inc. rose 3/8 to 10 1/4, Union Bank added 1 1/2 to 24 3/4 and CalFed rose 1/4 to 20 3/8.
Eastman Kodak climbed 1 7/8 to 41 7/8. The company, rumored to have attracted possible bidders for its Sterling Drug operations, said it wouldn’t comment on rumors.
NCH Corp. slumped 4 1/2 to 58 3/4. The company attributed the selling to the flat quarterly earnings it reported on Tuesday.
General Host, which posted higher profits for the fiscal quarter ended May 20, gained 5/8 to 7 1/4.
In Tokyo, stocks closed slightly higher in moderate trading, as a lack of new factors drove most investors to the sidelines. The key 225-share Nikkei index closed up 31.88 points at 32,847.09.
In London, stocks ended lower with the Financial Times 100-share index losing 21.6 points to close at 2,358.5. In Frankfurt, West Germany, the DAX index dropped 27.67, to 1,849.02, as foreign buyers stepped away.
CREDIT Bonds End Mixed in Light Trading Bond prices were mixed as the market awaited more information on the condition of the economy. Trading was light.
The Treasury’s benchmark 30-year bond rose 1/8 point, or $1.25 per $1,000 face amount. Its yield, which moves in opposition to its price, slipped to 8.44% from 8.45% late Tuesday.
Raymond Stone, analyst with Stone & McCarthy Associates of Princeton, N.J., said the market was treading water until next week, when new government reports are due on retail sales, trade and consumer prices. Analysts say the reports could provide a clearer picture of the economy and of chances that the Federal Reserve will encourage lower interest rates.
The federal funds rate, the interest rate banks charge each other on overnight loans, was quoted at 8.125%, versus 8.25% Tuesday.
CURRENCY Dollar Stronger Amid Sluggishness The dollar gained against all major currencies except its Canadian counterpart in sluggish domestic trading marked by various international considerations.
Gold prices posted moderate declines in the United States after moving slightly higher abroad.
Foreign exchange dealers reported trading volume was light.
A series of concerns depressed the Swiss franc and West German mark, steering investors to the dollar. Confirmation that Switzerland is seeking to join the International Monetary Fund and speculation about possible declines in Swiss interest rates encouraged selling of the Swiss franc, said Richard Levine, a first vice president at Merrill Lynch Futures.
The West German mark came under renewed pressure amid reports of a potential strike by thousands of workers in East Germany.
COMMODITIES Energy Futures Finish Day Higher Energy futures prices finished higher on the New York Mercantile Exchange, rebounding from early losses.
On other markets, grains and soybeans were mostly higher, precious metals declined, and livestock and pork futures were mixed.
Energy futures rallied after opening sharply lower in reaction to inventory figures released after the close of trading Tuesday by the American Petroleum Institute.
The API report showed a rise of 2.5 million barrels in crude oil stocks, a 2.3-million barrel increase in gasoline stocks and a 4.1-million barrel increase in distillates, which include heating oil.
But prices soon reversed course and began to rise. The feeling is that all the bad news is out, and from the fundamental perspective, little more could adversely affect the market, said Nauman Baraket, an analyst with Shearson Lehman Hutton Inc. in New York.
West Texas Intermediate crude oil was 4 to 24 cents higher, with the contract for delivery in July at $16.92 a barrel; heating oil was 0.12 to 0.29 cent higher, with July at 47.31 cents a gallon; unleaded gasoline was 0.40 to 0.56 cent higher, with July at 58.36 cents a gallon.
