Financial Markets : STOCKS : Worry Over Economy Sends Dow Down 1.48
The stock market slipped in quiet trading Thursday, reflecting concern about the economy.
The Dow Jones index of 30 industrials, down 3.72 Wednesday, lost 1.48 to close at 2,928.22.
Due to a New York Stock Exchange error in the closing price of Chevron, the final Dow for Wednesday was adjusted to 2,929.70, instead of 2,929.95.
In the broader market Thursday, declining issues outnumbered advances in nationwide trading of New York Stock Exchange-listed stocks, with 560 up, 917 down and 500 unchanged. Big Board volume slipped to 135.77 million shares, from Wednesday’s 158.91 million.
The market started slowly with the release of a government report showing the producer price index up 0.3% in May. Traders said the figure was disappointing but not unexpected, and provided little encouragement that the Federal Reserve might soon relax interest rates.
Analysts said the market would seek direction from today’s consumer price index for May.
The CPI for May is expected to show a 0.3% rise. A weak figure would point to a slowing economy, which could lead the Fed to ease monetary policy, analysts said.
Stocks also fell after reports of lower earnings at two technology firms, Digital Equipment Corp. and United Telecommunications.
Michael Metz, analyst at Oppenheimer & Co., said the news triggered a round of futures-related computerized program selling that brought down technology stocks.
Digital fell 1 3/4 to 86 3/8. United Telecom, the most heavily traded stock on the NYSE, fell 3 1/4 to 40 7/8 after analysts cut their earnings estimates for the second quarter and the year.
However, many smaller tech stocks continued to advance, including Oracle, up 1 3/4 to 22 3/4;SynOptics, up 3 1/4 to 52 3/4, and Autodesk, up 1 3/8 to 53 7/8.
S&L; stocks were mixed after tumbling Wednesday. HomeFed dropped 1 to 24 after plunging 8 1/4 Wednesday on word of rising problem loans. Thursday, Downey Savings dropped 1 1/4 to 17 3/4 and Great Western lost 5/8 to 18 1/4. But CalFed rose 3/8 to 19 7/8 and Ahmanson gained 1/4 to 21 1/2.
California bank stocks continued to weaken. Wells Fargo slumped 3 3/8 to 78 1/4 and Security Pacific fell 1 to 39 3/8.
Athletic shoe maker K-Swiss jumped 2 1/4 to 27, while rival L.A. Gear lost 1 3/4 to 27 3/8.
Northrop gained 1 to 19 3/8, but elsewhere in the defense sector most stocks were lower. McDonnell Douglas dropped 3 1/8 to 39 3/8 as analysts cut earnings estimates.
Amgen rose 1 1/8 to 75 1/8. The biotech company declared a 2-for-1 stock split effective Aug. 10. In Tokyo, stocks closed higher in light trading boosted by institutional investor demand for blue chip and real estate issues. The key Nikkei 225-share index rose 296.34 to 32,668.11.
In London, prices finished slightly lower. The Financial Times 100-share index was down 2.4 points at 2,403.0. West Germany’s banks and securities markets were closed for a holiday.
CURRENCY Officials’ Comments Spur Dollar Climb The dollar finished higher against most major currencies, gathering strength from supportive comments by U.S. officials.
Federal Reserve Board Governor Wayne D. Angell said it was possible for the United States to achieve zero inflation without high trade-off costs such as recession or depression.
The comment suggested that the Fed would stay vigilant toward inflation with a firm hold on credit policy. Also, Fed Vice Chairman Manuel H. Johnson expressed satisfaction with current dollar levels.
The dollar also garnered support from comments by Commerce Secretary Robert Mosbacher, who said the U.S. trade deficit would continue to shrink this year. He estimated that the yearly gap would reach $75 billion in 2 1/2 years.
CREDIT Bonds Up on Belief Inflation May Fall Bond prices seesawed on conflicting economic signals but finished higher, rallying late in the session on optimism that inflation could decline later this year.
The Treasury’s key 30-year bond advanced 13/16 of a point, or about $4 per $1,000 in face amount. Its yield dropped to 8.34% from 8.38% late Wednesday.
Brokers said bonds initially rose on word that gold prices had tumbled overseas. The decline funneled investor money into the bond market, partly on the theory that lower gold prices imply easing inflation, which makes fixed-income securities worth more.
Bonds receded, however, when the Labor Department reported a 0.3% increase in May wholesale prices. The figure was larger than many expected and suggested the Federal Reserve won’t ease interest rates. The bond bulls returned late in trading.
The federal funds rate, the rate banks charge each other on overnight loans, was quoted at 8.25%. The late Wednesday rate was 15%, a brief aberration due to a bank reporting requirement deadline, when the rate often fluctuates wildly. The Tuesday rate was 8.188%.
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