NEW YORK — The stock and bond markets suffered steep losses Tuesday as investors coped with anxieties over the economy, rising commodity prices and technical market dynamics.
Stock prices were repeatedly sent up and down by maneuvers designed to profit from differences between the prices of stock index futures contracts and actual stocks.
The Dow Jones average of 30 industrials tumbled 27.98 to 1,870.36. The blue-chip indicator had traded at moderately lower levels most of the session until the final hour, when a powerful selling wave dragged it sharply lower.
In the bond market, the bellwether 30-year bond fell by 1 18/32 points, or more than $15 per $1,000 face value, to yield 7.33%, up from Friday's 7.21%.
Losers swamped gainers by about two to one in the daily tally on the New York Stock Exchange. Volume on the Big Board grew to 135.53 million shares from 125.27 million on Friday.
A prevalent worry going into the session was that Wall Street might fare as poorly as it did after the Independence Day holiday. On July 7, the Dow Jones industrial average skidded a record 62 points.
Meanwhile, investors looking at the latest economic signals are apt to be confused and may hesitate in making financial commitments until the economy behaves less erratically, analysts say.
Indication of Strength
The latest reports have transmitted mixed signals.
A bit of optimistic news came from corporate purchasing managers. The latest survey by the National Assn. of Purchasing Management concluded that the economy strengthened considerably during August, with good gains noted in production and new orders.
The Commerce Department reported Tuesday that U.S. factory orders rose 2.2% in July, the best monthly gain since late 1984. However, the hefty increase largely reflected strong demand for military equipment.
But analysts have been disappointed that the dollar's decline has so far failed to bring about improvement in the country's trade balance.
The U.S. trade deficit has continued to swell, acting as a drag on manufacturing. The merchandise trade deficit hit $18.04 billion in July, the biggest shortfall for a single month.
Owens-Corning Fiberglas topped the Big Board's most active list, down 1 to 77 7/8 with nearly 3.9 million shares changing hands.
Eastern Airlines, which on Tuesday announced an austerity program including plans to lay off 1,500 employees, fell 1/8 to 8 5/8.
Among the active blue chips, American Telephone & Telegraph dipped to 24 3/8, International Business Machines fell 2 3/4 to 136 and General Electric dropped 2 7/8 to 75 3/4.
Centerior Energy rose 1 to 27 1/2 amid talk that the Nuclear Regulatory Commission will meet Friday to consider granting the company a full-power license for a nuclear power plant.
On the NYSE, 1,062 issues declined in price, 565 advanced and 373 were unchanged.
Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 159.98 million shares.
Topping the most active list on the American Stock Exchange was Wickes Cos., down 1/8 to 5 1/8 on volume of 1.4 million shares. Second most active was Echo Bay Mines Ltd., up 1 3/8 to 21 1/2 on volume of 830,800 shares. BAT Industries most third most active, up 1/16 to 6 on trading of 351,700 shares.
Large blocks of 10,000 or more shares traded on the NYSE totaled 2,337, compared to 2,001 on Friday.
Standard & Poor's index of 400 industrials fell 4.79 to 273.35, and S&P's 500-stock composite index was off 4.41 at 248.52.
At least some of the weakness in bonds was due to inflation fears, fanned by a surge in the prices of precious metals. Gold shot above $400 an ounce.
K. Ralph Bloch, a technical analyst with Moseley Securities in Chicago, said the setback was to be expected given the market's August advance. "Given the huge run from early August . . . this was a well-deserved and overdue bout of profit taking," Bloch said.
The fact that short-term bonds fared better than long-term issues Tuesday also indicated the market's uneasiness over the prospects for inflation, analysts said.
In addition, there was also a "simple fear that the economy may be stronger than expected," said William Gross, an analyst at Pacific Investment Management in Newport Beach.
In the secondary market for Treasury bonds, prices of short-term governments fell 11/32 points, intermediate maturities fell 1 15/32 and 20-year issues were down 1 28/32 point.
In corporate trading, industrials and utilities each fell 3/4 point in light trading.
Among tax-exempt municipal bonds, general obligations were down 3/4 point in moderate trading and revenue bonds were down 3/4 in heavy trading.
Yields on three-month Treasury bills were up 7 basis points to 5.22%. Six-month bills rose 5 basis points to 5.21%. One-year bills were up 5 basis points at 5.31%.
The federal funds rate traded at 5.875%, up from 5.6875% late Friday.