FINANCIAL MARKETS : Housing News, Trade Fears Shove Dow Down 34 Points
Blue-chip stocks closed sharply lower Monday, prompted by positive economic data that put a damper on hopes that the Federal Reserve Board will lower interest rates and by continuing fears that there will be a trade war between the United States and Japan.
The Dow Jones industrial average fell 34.59 points to 4,551.25. In the broader market, declining issues outnumbered advancers by about 7 to 3 on the New York Stock Exchange, with Big Board volume totaling 296.67 million shares, down from 318.5 million on Friday.
Other market indicators fell too. The NYSE composite index dropped 2.69 points to 291.48, the Standard & Poor’s 500-stock index lost 5.58 points to 544.13, and the Nasdaq composite index tumbled 11.89 points to 926.98. The American Stock Exchange market value index fell 4.37 points to 489.11.
Analysts said a National Assn. of Realtors report that sales of existing homes rose by an unexpectedly strong 4.7% in May appears to lessen the chances of an interest rate cut by the Fed’s policy-setting committee when it meets July 5-6.
That report prompted a rise in bond yields and started the stock market on a sour note.
There was also some anxiety in the bond market about upcoming auctions of new securities and about the possibility of another report of surprisingly strong economic results.
The Treasury’s benchmark 30-year bond yield closed at 6.55%, up from 6.49% on Friday, while its price, which moves in the opposite direction, dropped 25/32 point, or $7.81 per $1,000 in face value.
“The housing numbers and . . . fears of a trade war are giving investors a reason to take profits,” said Bob Walberg, analyst at MMS International. “It’s an orderly decline in high-techs, some medical and airline shares.”
The two top negotiators in the U.S.-Japan auto feud were making a final push Monday to avoid the punitive tariffs the United States has threatened to impose. If no accord is reached by Wednesday, the United States says, it will levy import duties of 100% on Japanese luxury cars.
Technical analysts noted that stocks have been ripe for a modest correction of 5% to 7%, given their recent continued climb to record highs.
Finally, weak overseas markets also put pressure on the market at its opening.
In London, share prices plunged as investors were gripped by political worries. The FTSE-100 average finished down 70.2 points at 3,309.2. In Frankfurt, the 30-share DAX average closed 9.37 points lower at 2,130.41. Tokyo’s 225-share Nikkei average closed down 119.82 points at 15,145.36.
Among Tuesday’s highlights:
* Disney fell 2 1/2 to 57 on news that “Pocahontas,” the company’s latest animated feature, grossed $29.5 million at the box office last weekend, less than expected.
* Coventry shed 7 3/4 to 14 after it said its current-quarter earnings will fall below Wall Street expectations. The stock of other health maintenance organizations also dropped. Oxford Health lost 4 1/8 to 52 1/4 and PacifiCare fell 3 1/4 to 54 1/4.
* Franklin Quest fell 1 3/8 to 22 3/4. William Blair downgraded stock in the management-support company, sources said.
