FINANCIAL MARKETS : STOCKS : Slow Growth in GNP Sends Dow Down 22
Stock prices slumped Friday as the market absorbed new evidence of sluggish business conditions.
The Dow Jones index of 30 industrials fell 22.28 to 2,898.51, extending its loss for the week to 62.63 points.
Declining issues outnumbered advances by about 9 to 5 in nationwide trading of New York Stock Exchange-listed stocks, with 530 up, 930 down and 534 unchanged.
Big Board volume was 149.07 million shares, against 155.04 million in the previous session. Nationwide, consolidated volume in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 184.08 million shares.
The Commerce Department reported that the gross national product grew at a 1.2% annual rate, after adjustment for inflation, in the second quarter of the year.
The figure came in below most advance estimates. In addition, analysts noted that a significant amount of the increase stemmed from inventory expansion, a negative portent for production.
Open-market interest rates declined in response to the news. For stock traders, however, the data seemed primarily to emphasize recent worries about the outlook for corporate profits.
Many big-name stocks have run into selling of late on earnings reports that didn’t live up to expectations.
Market highlights:
Walt Disney dropped 5 to 116 after the company reported a 23.3% quarterly earnings gain that disappointed some traders.
Grumman Corp., by contrast, gained 3/4 to 15 1/2. The company said its second-quarter profit outpaced analysts’ estimates and projected higher profits in the second half.
Energy stocks were mostly higher on word that the Organization of Petroleum Exporting Countries had agreed on a new oil production ceiling and reference price of $21 a barrel for the rest of the year. Exxon rose 3/8 to 49 1/4; Arco was up 7/8 to 125; Amoco rose 7/8 to 54 1/4, and Chevron gained 1/4 to 77 1/4.
Losers among the blue chip industrials included International Business Machines, down 1 3/4 at 111 3/8; American Telephone & Telegraph, down 3/4 at 36 1/4; General Electric, down 1 at 72, and American Express, down 1/2 at 29 1/2.
Bank stocks also were mostly lower. Citicorp dropped 1/2 to 20 5/8; Chase Manhattan lost 3/8 to 19 5/8; BankAmerica slid 3/8 to 25 3/4, and Manufacturers Hanover fell 1/2 to 31.
In Tokyo, shares plunged but recovered half their losses in a turbulent day to close down for the sixth day running as fears of higher interest rates hung over the market. The key 225-share Nikkei index lost 1,000 points but then recovered to end 506.27 points, or 1.61%, lower at 30,863.48 after losing 331.52 on Thursday.
In London, prices weakened and closed near the low point of the day’s trading range, depressed by losses on Wall Street. But selling interest remained thin in a narrowly traded market. The Financial Times-Stock Exchange 100 index ended 14.0 points down at 2,330.1.
In Frankfurt, West Germany, stocks closed broadly easier in thin trading on pre-weekend position squaring and a lack of new factors. The 30-share DAX index finished 13.08 points lower at 1,919.81.
CREDIT
Economic News Gives Bonds a Boost Bond prices climbed Friday on further signs of weak economic growth.
The Treasury’s benchmark 30-year bond gained 11/16 point, or $6.88 per $1,000 in face amount. Its yield, which falls when prices rise, dropped to 8.47% from 8.54% late Thursday.
The spurt came after the Commerce Department said the gross national product grew at an annual rate of just 1.2% from April through June. Slower growth increases the likelihood that inflation will be mild, which increases the value of fixed-income investments such as Treasury bonds.
The federal funds rate, the interest banks charge each other on overnight loans, was quoted at 8%, unchanged from late Thursday.
CURRENCY
Sluggish Business Data Hurts Dollar Fresh evidence of a weaker U.S. economy knocked the dollar lower against all major currencies Friday.
“Consistent evidence of weakness in the U.S. economy continued to accumulate,” said Bill Arnold of Chemical Banking Corp.
The dollar ended at 1.6115 German marks, down more than one pfennig from 1.6240 marks at Thursday’s close.
The dollar fell more than Japanese 1 yen, closing at 149.00, compared to 150.35 Thursday.
The British pound gained sharply against the dollar, boosted not only by weakness in the U.S. unit but a high interest rate differential between the pound and the dollar.
It jumped to $1.8375 from Thursday’s close of $1.8150.
COMMODITIES
Soybean Futures Sag on Profit Taking Soybean futures prices fell sharply Friday on the Chicago Board of Trade amid profit taking that erased most of the previous session’s gains and sparked selloffs in the corn, oat and wheat markets.
On other commodity markets, energy futures were mixed; copper futures rose; precious metals fell, and livestock and meat futures were mixed.
Soybean futures settled 3 1/2 cents to 11 1/2 cents lower, with August down 8 cents at $5.84 1/4.
The August soybean contract had risen 8 3/4 cents and other soybean contracts rose as much as 12 1/2 cents on Thursday.
There was little bullish news Friday to help the soybean market sustain the price levels it reached Thursday amid signs of strong soybean meal demand and prospective Soviet buying, analysts said.
Instead, traders returned their attention to the Midwestern weather forecasts, which continue to look good for soybean and corn crop development.
In grain trading, wheat futures settled 2 1/4 to 3 1/4 cents lower, with September at $2.98 1/2 a bushel; corn was 1/2 cent to 2 1/2 cents lower, with September at $2.62 1/2 a bushel, and oats were 3 to 3 1/2 cents lower, with September at $1.30 a bushel.
Petroleum futures finished mixed, with near-term deliveries down moderately, after OPEC oil ministers meeting in Geneva agreed, as expected, on a higher target price and new output quotas for crude oil.
The new target price of $21 per barrel is $3 above the Organization of Petroleum Exporting Countries’ previous reference price.
West Texas Intermediate crude oil settled 26 cents lower to 15 cents higher, with September at $20.04 a barrel; heating oil was 0.35 cent lower to 0.08 cent higher, with August at 56.97 cents a gallon, and unleaded gasoline was 0.55 cent lower to 0.03 cent higher, with August at 64.88 cents a gallon.
