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Profit Taking Cuts Off 6-Day Rally : Dow Falls 6.61; Bond Prices Rise on Hope of Easier Credit

August 20, 1986|From Times Wire Services

NEW YORK — Stock prices pulled back in subdued trading Tuesday despite a buoyant bond market.

If not for strength in the stock of International Business Machines and a handful of other blue chips, the market would have had a worse showing.

The Dow Jones average of 30 industrials finished with a loss of 6.61 at 1,862.91, ending a six-session string of advances.

The New York Stock Exchange's composite index of all its listed common stocks fell 0.41 to 141.91.

Volume on the Big Board fell to 109.31 million shares from 112.84 million on Monday.

Wall Streeters were not surprised by the market's behavior, attributing it to investors selling to collect profits.

"Given the fact that the market was up 10 out of the last 11 days, some kind of a pause, rest, pullback or whatever was due," said Ralph Bloch, a vice president at Moseley, Hallgarten, Estabrook & Weeden in Chicago.

There was some disappointment over a gloomy government assessment of the economy's second-quarter performance.

The Commerce Department reported Tuesday that the economy crawled at a feeble 0.6% growth pace from April through June. The increase in the gross national product was the smallest since the last recession and was down from an initial estimate of 1.1% that the department made last month.

The unexpectedly large downward GNP revision intensifies pressure on the Federal Reserve Board to stimulate economic growth by driving interest rates lower, several analysts said.

The blue-chip barometer got a lift from a few key stocks, including IBM and Owens-Illinois.

IBM gained 1 3/8 to 136 3/4 and was the second-most actively traded stock on the Big Board. A few other technology issues fared fairly well.

Subject of Rumors

Owens-Illinois jumped up 4 to 44 3/4. The company has been the subject of market rumors lately, all of which have been denied by management.

Investors gave an enthusiastic greeting to Sun Chemical's announcement Monday that it has agreed to sell its graphic arts materials group to a Japanese firm. Sun Chemical shares climbed 10 3/8 to 84 1/2.

ICN Pharmaceuticals of Costa Mesa topped the Big Board's most-active list and rose 1 5/8 to 30, recovering some of Monday's loss. The stock had gained more than 12 points last week in buying linked to recommendations from several brokerages.

In the daily tally on the NYSE, 853 issues declined in price and 749 increased; 390 were unchanged.

Large blocks of 10,000 or more shares traded on the NYSE totaled 2,078, compared to 2,045 on Monday.

Bond prices pushed sharply higher and interest rates dropped amid expectations that the Fed would ease credit restrictions to stimulate economic growth.

The Federal Open Market Committee, an arm of the Fed that sets monetary policy, met on Tuesday, intensifying speculation that the Fed would cut the discount rate to stimulate borrowing and economic growth, analysts said.

The bellwether 30-year bond rose 1 3/16 points to yield 7.17%, down from 7.27% late Monday. The 20-year bond rose 1 1/8 points.

In corporate trading, industrials rose 3/4 point and utilities rose 1/8 point in moderate to heavy trading.

Among tax-exempt municipal bonds, general obligations rose 3/4 point and revenue bonds were up a point. Trading was moderate to heavy.

Yields on three-month Treasury bills were down 6 basis points to 5.54%. Six-month bills fell 1 basis point to 5.55%. One-year bills were down 10 basis points at 5.53%. A basis point is one-hundredth of a percentage point. The federal funds rate, the interest on overnight loans between banks, traded at 6.25%, unchanged from late Monday.

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