NEW YORK — Stock prices suffered big losses again Tuesday as investors reeled from the shock of Monday's severe setback on Wall Street. The tumbling stock prices jarred the bond market, with prices of some actively traded Treasury bonds losing more than $10 for each $1,000 in face amount.
Trading on the New York Stock Exchange was the busiest that it has been in about three months. Volume expanded to 174.06 million shares, the heaviest since April 10, when 184.76 million shares changed hands, and up from 138.23 million on Monday.
The Dow Jones average of 30 industrials finished down 18.27 points at 1,820.73, well above its lowest levels of the day.
The blue-chip indicator plunged when trading opened and was down about 30 points several times during the session. The market made several unsuccessful attempts to rebound before buying resumed in earnest in the final minutes.
Although analysts had anticipated that this year's rally would lose momentum, the magnitude of the market's reversal startled investors. The Dow Jones industrial average registered its worst point loss in history--61.87 points on Monday.
Losers Top Gainers
The overall market fared poorly Tuesday as losing issues outnumbered gainers by about five to one on the New York Stock Exchange.
Worries that anemic economic growth might postpone improvements in corporate profits has soured many investors on stocks.
Several influential analysts, discouraged that the economy has not lived up to their expectations, have recently advised clients to lighten their stock holdings, which has led to a welter of sell orders.
Hildegarde Zagorski, market strategist for Prudential-Bache Securities in New York, said the outlook for the economy and interest rates has become murky, so investors who have amassed handsome profits during the market's powerful advance have decided to "cash in their chips."
But Wall Streeters said the slide in stock prices presents new buying opportunities and might eventually lead to a renewed climb.
Market leader International Business Machines trimmed its loss and wound up the day down 5/8 to 144 5/8.
Among other components of the Dow Jones industrial average, Sears, Roebuck slid 1 5/8 to 44 3/4, General Electric fell 3/8 to 76 3/8, Minnesota Mining & Manufacturing moved down 3/4 to 107 5/8 and American Telephone & Telegraph ended up 1/8 at 25 5/8.
Airline Issues Climb
Several airline stocks were in the plus column. Pan Am rose 1 1/8 to 7 and topped the roster of actively traded issues on the Big Board at the close. Eastern rose 1/8 to 9.
U.S. Steel, which announced that it is changing its name to USX and plans to restructure its steelmaking business, was up at 20 1/8.
In the daily tally on the Big Board, 1,399 issues posted price declines, 278 issues gained and 308 showed no change. Large blocks of 10,000 or more shares traded on the NYSE totaled 3,110, compared to 2,347 on Monday.
Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 203.5 million shares.
Standard & Poor's index of 400 industrials fell 2.71 to 268.80, and S&P's 500-stock composite index was off 2.46 at 241.59.
Besides the setback on Wall Street, analysts attributed the bond market's disappointing performance to fading hopes of additional declines in interest rates anytime soon.
The benchmark 30-year Treasury bond ended the session down 1 point, or $10 for each $1,000 in face value. That raised the key bond's yield to 7.23% from 7.16% late Monday.
The pessimism about rates, according to analysts, was traced to a report published in Tuesday's editions of the Washington Post that said several members of the Federal Reserve Board would resist a reduction in the discount rate, the interest that the central bank charges on loans to financial institutions.
Expecting Cut in Rates
Bond dealers have been counting on a cut in the discount rate, now at 6.5%, to perk up the sluggish economy. By lowering its discount rate, the Fed would be demonstrating its desire for lower credit charges throughout the economy.
But some Fed governors reportedly would prefer not to cut the discount rate without assurance that Japan, West Germany and other major U.S. trading partners will undertake similar rate reductions. The fear is that a unilateral move by the United States would sharply lower the value of the dollar against the Japanese yen and other key currencies.
In the secondary market for Treasury securities, prices of short-term governments fell by 9/32 point to 5/16 point and intermediate maturities were down 13/32 point to 3/4 point, according to the investment firm of Salomon Bros. The firm said the 20-year bond lost 1 3/4 point.
Corporate Bonds Slip
In corporate trading, utilities dropped 1 point and industrials fell 3/4 point. Among tax-exempt municipal bonds, general obligations fell 1/2 point and revenue bonds lost 3/4 point. Salomon Bros. said trading in corporate and municipal paper was light to moderate.
Yields on three-month Treasury bills rose 9 basis points to 5.96%. A basis point is one-hundredth of a percentage point. Six-month bills were up 13 basis points at 5.98%, and one-year bills spurted 14 basis points to 6.04%.
The federal funds rate, the interest on overnight loans between banks, traded at 6.875%, compared to 6.8125% late Monday.