Doubts About IBM Send Dow Down 14.75
Market Overview
Highlights of Monday’s market activity, compiled from Times staff and wire reports:
* A late-afternoon barrage of selling, some of it program-related, and declines in blue chips International Business Machines and General Motors wiped out a modest advance on Wall Street. The Dow Jones average fell 14.75 points to 2,871.65.
* Crude oil futures prices plunged to an eight-month low on the New York Mercantile Exchange--extending last week’s slide--amid light demand for heating oil.
* Treasury bond prices rose as the market continued to benefit from last week’s cut in a key lending rate and an employment report that brought expectations of further rate cuts.
Stocks
A big drop in IBM shares that followed a company meeting with analysts helped push the overall market lower.
Chairman John F. Akers told the analysts that IBM’s profit will improve next year because of its restructuring program, but he was guarded about how much improvement there will be. Analysts said the briefing left them skeptical about IBM’s short-term prospects.
Once the analysts’ mostly pessimistic reaction to the briefing got out, IBM stock lost 3 7/8 at 85 1/8 in heavy trading. Walter Murphy, senior international market specialist at Merrill Lynch, said IBM’s decline accounted for about half of the 14.75-point drop in the Dow average.
In the broader market, declining issues outnumbered advances by about 4 to 3 on the New York Stock Exchange. Big Board volume fell to 174.76 million shares from 198.2 million Friday.
Aside from special situations, investors found little fresh news to spur buying. Economic growth remains sluggish and Washington has so far not been able to produce a coherent economic policy.
Among the market highlights:
* General Motors, like IBM a market bellwether, sank to a 52-week low of 27 1/2 before recouping to 27 5/8, down 1 3/8. Traders said the stock is at its weakest level since late 1987.
* Microsoft dropped 2 1/4 to 102 after a negative article in the Wall Street Journal. However, analysts at Smith Barney and First Boston recommended purchase of the shares.
* A.H. Belo jumped 4 1/8 to 28 3/4 after it said it is acquiring the rival Dallas Times Herald’s assets.
Overseas, a late futures rally helped the London market shrug off domestic economic and political worries. The Financial Times 100-share average finished up 20.9 points at 2,409.6.
Tokyo stocks closed lower in the thinnest volume this year. The 225-share Nikkei average closed down 92.18 points at 22,352.88.
German shares ended little changed. In Frankfurt, the 30-share DAX average edged up 0.87 points to 1.559.05.
Credit
In the credit market, the 30-year bond closed up 1/8 point, or $1.25 per $1,000 in face amount. Its yield, which moves in the opposite direction from price, fell to 7.78% from 7.80% Friday.
The federal funds rate, the interest on overnight loans between banks, was 4.25%, down from 4.5% Friday.
Currency
The dollar settled mostly higher in extremely quiet trading.
In New York, the dollar closed at 1.571 German marks, up from 1.568 Friday. It also finished higher against the Japanese yen--at 128.27, compared to 127.95 Friday. The British pound fell to $1.8128 from Friday’s $1.8167.
Commodities
On commodity markets, grains and soybean were mixed, precious metals edged lower and livestock and meat futures were mixed.
January heating oil plunged 2.70 cents to 54.44 cents a gallon, January unleaded gasoline dropped 1.74 cents to 53.26 cents a gallon and January natural gas sagged 4 cents to $1.939 per 1,000 cubic feet.
Precious metals ended slightly lower on New York’s Commodity Exchange after opening stronger in reaction to the Soviet news. December gold slipped 10 cents to $369.30 an ounce; December silver fell 1 cent to $4.011 an ounce.
Market Roundup, D10
