Gloomy Consumer Confidence Report Prompts Dow to Tumble 24.59 : Market Overview

Highlights of Tuesday’s market activity, compiled from Times staff and wire reports:

* Wall Street’s hopes for an economic recovery were jolted by a report that showed consumer confidence at a 17-year low. The Dow Jones industrial average lost 24.59 points to 3,257.83. But it was off 42 points early in the session.

* Bond yields fell as traders viewed the consumer confidence report as improving chances for a further cut in interest rates.

Stocks

The Conference Board said its February confidence survey showed that Americans are more gloomy about the economy than they have been since December, 1974, when double-digit inflation ravaged the nation and sent unemployment soaring.

The board, a private New York-based business research group, said its February confidence index fell to 46.3 from January’s 50.4.

The news sent investors scurrying to take profits in cyclical stocks, which had been gaining favor on hopes of a pickup in the economy. Stocks of auto, paper and airline companies were among those hit by the selloff.

In the broader market, declining issues outnumbered advances by 8 to 5 on the New York Stock Exchange. Big Board volume totaled 210.35 million shares, up from Monday’s 181.33 million.

“I don’t think anyone expected it (the confidence survey) would show a decline,” said Alice Sadlo, analyst at McDonald & Co. “It really hurt us badly. Everyone was under the impression it would show a slight improvement, that the economic recovery was intact.”

Analysts said stocks too only minor comfort from Federal Reserve Chairman Alan Greenspan’s testimony before Congress. He said the Fed stood ready to cut interest rates if a recovery fails to take hold this spring.

Nonetheless, as depressing as the confidence report was, the market’s selloff was fairly limited, analysts noted. The Dow’s loss was 0.8% for the day. The NASDAQ composite index of smaller stocks fell 3.53 points, or 0.6%, to 621.40.

Among market highlights:

* Among the cyclical stocks, GM fell 1 1/4 to 36 1/2, Ford lost 1 3/8 to 35 1/2, Alcoa dropped 1 7/8 to 68 1/4, Goodyear gave up 1 7/8 to 62 1/8 and Georgia-Pacific slid 3 1/2 to 63 1/8.

* Airlines and railroads were hard hit for a second day. UAL, parent of United Airlines, fell 3 3/4 to 149 3/4, Delta lost 2 1/2 to 67 3/4 and Conrail dropped 1 7/8 to 80 3/4.

* Some drug stocks returned to favor after being dumped in recent weeks. Merck jumped 3 to 152 1/2. After the close the company announced a 3-for-1 stock split and a 10% increase in the dividend. Other drug gainers included Bristol Myers-Squibb, up 1 5/8 to 80 1/2, and Schering-Plough, up 1 3/8 to 58 7/8.

* Advanced Micro Devices added 1/8 to 19 1/4 and Intel lost 1 5/8 to 63 3/4 after an arbitrator ruled against Intel in a suit involving AMD’s use of an Intel 386 computer chip.

* Despite the consumer confidenc report, some retailers rose. Consolidated Stores advanced 1 1/4 to 14 3/4 after reporting fourth-quarter profits of 37 cents a share, up from 15 cents a year ago.

Other retailers rising after reporting quarterly earnings included May Department Stores, up 2 3/8 to 58 5/8; Waban, up 2 3/8 to 23 3/8, and Dillard, up 2 1/8 to 132 3/4.

* Scholastic, which publishes children’s books, went public at 22 1/2 Tuesday and soared to close at 28 1/4 on the NASDAQ market.

Overseas, London’s Financial Times 100-share average slipped 12.9 points to 2,546.80, while Frankfurt’s 30-share DAX average lost 6.80 points to 1,722.30, retreating from an 18-month high.

In Tokyo, the Nikkei average slid 318.57 points to 20,973.24.

Credit

The price of the Treasury’s key 30-year bond, which fell 9/32 point Monday, regained that amount Tuesday, or $2.81 per $1,000. Its yield fell to 7.94% from 7.97%.

The consumer confidence report opened the door to further interest rate cuts by the Federal Reserve, many bond traders say. Still, bond yields had been down much more sharply early in the day, and began to rise again toward the close.

The bond market’s optimism was offset somewhat by a Treasury auction of $14.3 billion in two-year notes. Investor response to the sale was described as lackluster, and the notes only added to the supply of securities the market must absorb. The average yield on the new notes was 5.4%.

The fed funds rate, the rate on overnight loans between banks, was 3.88%, flat with Monday.

Currency

A burst of buying sent the dollar higher in hectic domestic trading despite continued indications that the economy is mired in recession.

The dollar fell early in New York on the consumer confidence report. But traders took advantage of the dip to step in and buy with an appetite that made the session “possibly the most exciting day in the market so far this year,” said Marc Chandler, an analyst with advisory firm IDEA.

In New York, the dollar closed at 129.90 Japanese yen, up from 129.20 Monday. It also rose to 1.660 German marks, up from 1.653.

Commodities

Cotton futures rose on New York’s Cotton Exchange, despite a worldwide glut of the fiber.

Cotton has been in a downward trend for nearly a year. Futures were trading a little above 61 cents a pound in November before falling to 52.65 on February 21. But buyers stepped up on Tuesday, apparently sensing a market bottom. Cotton for March rose 1.55 cents to 55 cents a pound.

Meanwhile, platinum, traded on the New York Merc, led metals lower. Platinum for April settled $5 lower at $353.40 an ounce; February gold was off 40 cents at $349.40 an ounce; and March silver was 2.5 cents lower at $4.07.

Light sweet crude for delivery in April settled at $18.48 per barrel, up 5 cents, on the New York Mercantile Exchange.

Market Roundup, D8