FINANCIAL MARKETS : STOCKS : Dow Jones Drops 28.46 on Economic Jitters
Uncertainties about the outlook for interest rates and the economy helped drive blue-chip stock prices lower Thursday, reversing Wednesday’s late rally.
The Dow Jones average of 30 industrials, up 19.05 points on Wednesday, slumped 28.46 to 2,921.04, a 1% loss. Most other indexes fared better.
On the Big Board, losers swamped gaining stocks 970 to 577. Volume remained stuck in the same narrow range, at 166.94 million shares.
The market was pounded early in the session by news that initial claims for unemployment benefits climbed by 47,000 to 498,000 in the week ended April 13, indicating no signs of relief from the recession.
Though investors have recently cheered signs of weakness for the chance that such signals will mean a further drop in interest rates, more investors on Thursday concentrated on the weak economy’s effect on corporate earnings.
Ominously, Compaq Computer reported disappointing first-quarter results and warned of a decline in second-quarter profits. Its stock, the most active NYSE issue, plunged 9 3/8 to 53 1/2.
Ronald Hill, analyst at Brown Bros. Harriman, said: “We’re caught between seeing if interest rates will decline further and waiting to see if earnings will rise. The market is caught in a zone.”
Today, the government will make its initial report on first-quarter gross national product. On Thursday, the National Bureau of Economic Research, whose judgment in such matters is considered authoritative, said the recession officially began last July.
Among the market highlights:
* Compaq’s slide pulled down other tech stocks, including Dell Computer, down 1 3/8 to 23 1/2; Apple, off 2 1/4 to 58 1/2, and Tandon, down 6/16 to 3 15/16.
But investors didn’t sell the entire industry. Data General gained 1 1/2 to 18 after posting surprisingly strong second-quarter profits. And Sun Microsystems jumped 4 3/4 to 38 1/4 on a 59% surge in quarterly earnings. Still, some analysts warned that the tech sector may be peaking. (Market Beat column, D3.)
* Industrial and oil stocks suffered as fears rose about a deeper economic slide. GM lost 1 1/4 to 37, Reynolds Metals dropped 2 1/8 to 60 5/8, and Chevron fell 1 1/8 to 77 7/8.
Yet airline stocks rose, bucking economic worries. Delta gained 1 1/8 to 71 7/8, Alaska Air rose 1 1/4 to 22 3/4, and Southwest was up 1 1/8 to 25.
* Alberto-Culver tumbled 4 1/2 to 25 1/4 after analysts downgraded the beauty aids stock. The firm said heavy promotional spending will cut into second-half profits.
* Among Southland issues, drug distributor Bergen Brunswig added 3/8 to 26 3/8 after authorizing a $100-million stock buyback. Jacobs Engineering rose 1 1/4 to 37 7/8. It declared a 2-for-1 stock split. Insurer Argonaut Group also declared a split (3-for-1) and raised its dividend 28%. The news came late, and the stock rose 1/2 to 94 1/2.
In foreign trading, Tokyo stocks fell in another day of thin trading. The 225-share Nikkei average lost 291.35 points to 26,038.86.
In Germany, the DAX average ended 16.72 points higher at 1,620.45. London stocks fell, as the Financial Times 100-share index closed down 6.5 points at 2,482.1.
Credit
Worries about an oversupply of Treasury issues overshadowed a call by President Bush for lower interest rates, and bond prices ended mixed.
The Treasury’s 30-year bond fell 11/32 point, or about $3.44 per $1,000 face amount. Its yield rose to 8.24% from Wednesday’s 8.20%.
The Treasury sold new five-year notes Thursday at an average yield of 7.7%. Traders said selling of long-term bonds accelerated after a large investor tried to influence the T-note auction by placing a large bid. The bid initiated a wave of technical selling, which depressed bond prices.
Some traders seemed confused by President Bush’s statement that he wants to see interest rates lowered. The statement could cause new infighting within the Federal Reserve, some fear.
Federal funds, the interest on overnight loans between banks, rose to 6% from 5.8% Wednesday.
Currency
The dollar ended little changed after a volatile session.
The currency was pushed up by news of fresh political instability in the Soviet Union and then fell on President Bush’s plea for lower interest rates.
The dollar closed in New York at 1.749 German marks, up slightly from 1.746 Wednesday. It ended flat against the yen at 137.80.
Commodities
Cotton futures surged in New York amid new signs of tightening supplies.
Cotton settled 0.50 cent to 1.55 cents higher with the May contract at 89.50 cents a pound, matching the recent high set April 15.
Traders said steady consumption and declining production was tightening overall supplies.
Elsewhere, precious metals weakened, but losses were limited by buying linked to new indications of Soviet instability. Gold ended $2.10 to $2.30 lower in New York, with April futures at $354 an ounce; silver was 2.3 cents to 2.7 cents lower with May at $3.90.
Crude oil rose on the New York Merc. Light sweet crude oil settled 15 to 21 cents higher with the June contract at $21.15 a barrel.
Market Roundup, D6
