STOCKS : Profit Taking Sinks Prices; Dow Falls 13.20
The stock market declined Tuesday amid profit taking and lingering concerns over the pace of recovery.
The Dow Jones average of 30 industrials lost 13.20 to 3,026.16.
Declining issues outnumbered gaining ones by 5 to 4 on the New York Stock Exchange.
Volume on the floor of the Big Board came to 144.67 million shares, up from 135.57 million the previous session.
Stocks opened mixed but turned lower after a Conference Board report showed that consumer confidence edged down slightly in August. The report, which is seen as a harbinger of how willing consumers will be to spend their money, said Americans were less optimistic about coming months than they had been in July.
Analysts were divided over how much significance to attach to the report.
“It was a little bit disappointing,” said Hugh Johnson, a senior vice president at First Albany Corp. “It gave us our first real look at August . . . and it showed investors are very concerned that we’re not going to get a strong enough recovery in the economy and earnings to support stocks at current levels.”
Other analysts, however, downplayed the report’s significance. The market saw “just a minor adjustment,” said Christopher Pedersen, director of trading at 21st Securities Corp.
“The market got ahead of itself and is just catching its breath,” he said, referring to last week’s 72-point run-up in the Dow.
Some observers also noted that traders were unwilling to make new commitments ahead of the upcoming Labor Day long weekend. The relatively low volume underscored the notion that many investors have retreated to the sidelines.
Among the highlights:
* General Electric, which a published report said is negotiating the sale of its NBC unit with billionaire Marvin Davis, fell 1/2 to 74 1/8.
* Triton Energy plunged 6 3/8 to 39. The company’s energy reserve estimates, which appeared in a recent securities filing, were below analysts’ expectations.
* Salomon Inc., which had been rebounding in the wake of a government securities trading scandal, slipped 3/4 to 25 1/4.
* Black & Decker, the subject of a favorable analyst’s report, jumped 1 1/2 to 18 3/4.
* Telefonos de Mexico’s American depository shares, the most active Big Board issue with more than 5 million shares changing hands, rose 1 1/2 to 36 3/4.
* Among other actively traded blue chip issues, Limited was up 1/2 at 28, Toys R Us was unchanged at 35, Philip Morris rose 1/8 to 73 3/8, and IBM rose 1/8 to 95 1/4.
Overseas markets were mixed. In Tokyo, the 225-share Nikkei average closed up 49.03 points to 21,641.30. In London, the 100-share Financial Times index fell 20.9 points to 2,619.8 and in Frankfurt, Germany, the 30-share DAX index slipped 7.07 points to 1,647.12.
Treasury bond prices strengthened after a government auction generated strong demand, erasing fears that Salomon Bros.’ reduced presence in the market would chill activity.
The price of the bellwether 30-year bond was up 7/32 point, or about $2.19 per $1,000 in face amount. Its yield, which falls when the price rises, was 8.12%, down from Monday’s 8.14%.
The government last week barred Salomon from bidding for bonds on behalf of clients after the brokerage admitted that it had exceeded Treasury auction bidding limits and made unauthorized bids in the names of customers. Salomon is still a primary dealer and can bid for its own purposes, but a substantial part of its bidding had been for clients.
Investors were also afraid a widening probe by the Securities and Exchange Commission into possible collusion and price-fixing by traders would create more volatility in the $2.3-trillion Treasury securities market.
Those fears did not materialize during Tuesday’s $12.6-billion sale of two-year notes. Yields fell to 6.46%, the lowest level in more than four years.
The federal funds rate, the interest on overnight loans between banks, fell to 5 7/16% from 5 5/8% late Monday.
The dollar closed mostly higher in uneventful trading.
Paul Yarden, a currency trader at Credit Suisse in New York, said the Soviet power shift has already been factored in to exchange rates. Thus, traders “are not overly scared with the situation in the Soviet Union,” he said.
The dollar closed in New York at 137 Japanese yen, up from 136.90 Monday. It was at 1.7505 German marks, up from 1.7480. The British pound was unchanged at $1.6800.
Other rates in New York, compared to Monday, included: 1.5235 Swiss francs, down from 1.5240; 5.9435 French francs, up from 5.9365; 1,306.00 Italian lire, up from 1,304.50, and 1.1415 Canadian dollars, down from 1.1440.
Grain and soybean futures prices tumbled on the Chicago Board of Trade as investors worried that the Soviet Union would be unable to obtain bank financing to purchase crops through the U.S. export-credits program.
On other commodity markets, energy futures were mostly lower, meat and livestock futures were mixed and gold and silver futures slipped.
Wheat futures for delivery in September settled 3 1/4 cents lower at $3.02 3/4 a bushel; September corn settled 2 3/4 cents lower at $2.51 3/4 a bushel; September oats were 3 1/2 cent lower at $1.22 3/4 a bushel, and September soybeans were 8 cents lower at $5.74 3/4 a bushel.
President Bush on Monday released $315 million in credit to help the Soviets buy crops to get through the winter.
But investors fear that the Soviets may have trouble getting loans to finance the purchases because of instability there. Word that President Mikhail S. Gorbachev had threatened to resign if secessionist republics continue their isolationist paths sent declining prices tumbling further.
October light, sweet crude oil was 1 cent higher at $21.98 a barrel on the New York Mercantile Exchange.
August gold was 80 cents lower at $354.40 an ounce on the New York Commodity Exchange. August silver was 2 cents lower at $3.91 an ounce.
Market Roundup, D8