Stocks fell Monday in the slowest session in four years, as pre-Christmas trading was dominated by fears about the tension in the Persian Gulf and Soviet Union.
The Dow Jones industrial index fell 12.37 to close at 2,621.29. Declining shares led advances 862 to 511 on paltry New York Stock Exchange volume of 57.2 million shares, compared to 233.4 million Friday.
The session, shortened by two hours for the holiday, was the slowest since 48.9 million shares changed hands Dec. 26, 1986.
Sharp losses on the bond market also discouraged stock investors.
Comments over the weekend from U.S. and Iraqi officials heightened concerns about a possible Persian Gulf war.
Iraqi President Saddam Hussein said in an interview with Spanish television that Tel Aviv would be his first target if war broke out.
In addition, Defense Secretary Dick Cheney said that Iraq showed no sign of planning to withdraw from Kuwait and that the clock was ticking toward war.
The resignation of Soviet Foreign Minister Eduard A. Shevardnadze last week has also raised concerns about the Soviet Union’s political stability.
“All this talk is making people nervous,” said Ladenburg Thalmann’s Richard Meyer.
“It’s the combination of worry about a revolution in Russia and (concerns about the) Mideast,” said Phil Roth, chief technical analyst at Dean Witter.
“One of the factors here is the small attendance,” said Gene Jay Seagle, Gruntal & Co.'s director of research. “It’s a lack of buying rather than a lot of selling.”
Still, some analysts believe that stock prices could stage a rally after Christmas.
“We usually see a Santa Claus rally in the last four days of the old year and first two of the New Year,” Larry Wachtel at Prudential-Bache Securities said.
Among the market highlights:
* Manufacturers Hanover topped the most active list, off 1/8 at 23 7/8. Monday was the last trading day that investors could qualify for the company’s next dividend.
* Several utilities were actively traded. Southern New England Telephone was off 3/8 to 33 1/8, and Commonwealth Edison was up 1/8 at 34 5/8.
* Chiron Corp. was up 1/2 to 41 3/4. An anti-AIDS vaccine, developed by a joint venture of Chiron and Ciba-Geigy, will be tested on humans beginning in the next few days.
* Smith Barney repeated a buy on Halliburton. The oil services firm said it believes that most of an Internal Revenue Service claim against it is without merit. Halliburton rose 1/4 to 44.
In London, the British stock market closed early for the Christmas break after what dealers described as an extremely quiet session. The Financial Times-Stock Exchange 100 index finished 8.1 points lower at 2,156.3.
In Frankfurt, German stock exchanges were closed Monday for the Christmas holiday period. Trading will resume Thursday.
In Tokyo, the stock market was closed Monday for a national holiday and will reopen today.
CREDIT Talk of War Sends Bond Prices Down Bond prices fell in thin pre-holiday trading Monday on pessimism over heightened Middle East war talk.
The Treasury’s bellwether 30-year bond dropped 25/32 point, or $7.81 per $1,000 in face amount. Its yield rose to 8.35% from 8.29% late Friday.
Market analysts said increasing war talk over the weekend from U.S. and Iraqi officials sent down the price of the key bond at the start of trading.
Trading was extremely light in an abbreviated trading session.
The federal funds rate, the interest on overnight loans between banks, was trading at 7%, down from 7.25% late Friday.
CURRENCY Dollar Stronger in Active Trading The dollar strengthened broadly in surprisingly active trading Monday as traders sought a safe haven from heightened volatility in the Persian Gulf and the Soviet Union.
Gold rose in London and Hong Kong. New York precious metals markets were closed in observance of Christmas.
The dollar moved sharply higher in New York early in the day, particularly against the German mark and the British pound. Those gains were largely sustained, though trading tapered off before the currency markets closed for the holiday in the early afternoon.
In New York, the dollar rose to a closing 1.5453 German marks from late Friday’s 1.5289. Earlier, in London, the dollar advanced to 1.5390 German marks, up from 1.5295 marks late Friday.
The British pound weakened in New York to $1.8685 from $1.8860 late Friday. In London, the British pound was quoted at $1.8740, compared to $1.8835 late Friday.
The dollar rose in New York to a closing 136.00 yen from late Friday’s 135.50. In London, the dollar was quoted at 135.70 yen, unchanged from the close in Tokyo on Friday. Japanese exchanges were closed Monday for the Emperor’s birthday.
COMMODITIES Wheat Prices Rise on Weather Damage Wheat futures prices rose moderately Monday on the Chicago Board of Trade in a late rally linked to new export sales and fears of weather damage to the winter wheat crop.
Oat futures also advanced, while corn and soybean futures ended mostly lower on light volume in a shortened Christmas Eve trading session.
Most cattle futures rose, and pork futures finished mostly lower in a shortened session on the Chicago Mercantile Exchange. Other U.S. commodity markets were closed.
Wheat futures settled 1 3/4 to 5 cents higher, with the contract for delivery in March at $2.64 1/4 a bushel; corn was 1 1/4 cents lower to 1/2 cent higher, with March at $2.33 1/4 a bushel; oats were 1/2 cent to 1 1/4 cents higher, with March at $1.12 1/2 a bushel, and soybeans were 1 3/4 cents lower to 1 1/4 cents higher, with January at $5.62 1/4 a bushel.
Wheat futures drew some support from news of government-subsidized sales of U.S. wheat to Colombia, Yemen and Sri Lanka, analysts said.
The rally also reflected speculation about possible damage to the winter wheat crop after nearly a week of record-breaking frigid weather in the Great Plains, said Victor Lespinasse, an assistant vice president in the grain trading division of Dean Witter Reynolds Inc.
Market Roundup, D8