NEW YORK — Burdened by worries about the dollar, the stock market slumped Monday in a quiet trading session that dragged the Dow Jones industrial average down 56.70 points, to a closing level of 1,942.97.
The Dow fell about 50 points in the first hour of trading on news that the dollar had sunk to new lows in overseas trading. The indicator was off as much as 70 points during the day and was helped only slightly by a White House statement that the Administration does not want the currency to fall any lower.
"The markets don't like the dollar's fall and they also don't like the idea that government may want to raise interest rates to get the dollar back up," said Eugene J. Peroni, director of technical research at the Janney Montgomery Scott brokerage in Philadelphia.
Little Effect Seen
Investors expected little effect on the dollar from the White House's pronouncement, despite its forceful language, analysts said. The dollar's fall has continued despite central-bank purchases of the currency and despite last week's statement from officials of the leading industrialized nations that the nations want the dollar to stabilize.
The stock market session marked the second straight day of declining prices after a three-week rally that had lifted the Dow last Wednesday to 2,005.64, its highest level since Nov. 2. The widely watched index declined 5.97 points on Thursday.
Monday's volume was a relatively light 132 million shares but was significantly greater than the Christmas Eve volume of 108.8 million shares. The markets were closed Friday for Christmas. The Dow index's fall Monday represented a loss of 2.83% and was its 13th-largest decline on record.
The Dow Jones transportation index fell 17 points to 753.29, while the utilities index was off 1.54, to 137.47.
Broader market indicators were also down sharply, including the Standard & Poor's 500-stock index, down 6.45 points to 245.58, and the New York Stock Exchange composite index, which fell 3.35 to 137.50. Declining issues on the New York Stock Exchange outnumbered advances by a margin of about 6 to 1.
The American Stock Exchange index slid 4.30 to 256.60 Monday.
Santa Claus Rally
Several analysts said they had expected stocks to slide after the gains of recent weeks, particularly since the Dow had reached the 2,000 mark, which some saw as a psychological barrier. They speculated that the market may be helped in the next three sessions by the so-called Santa Claus rally, which has traditionally lifted the market in the week between Christmas and New Year's.
"At this time of year, the tax-loss selling eases off and there's some resurgence of optimism as people look toward the new year," said Gene Jay Seagle, technical analyst with Gruntal & Co. in New York. (If the value of a security falls during a given year, an investor may choose to sell it before Jan. 1 in order to claim the loss as a tax deduction.)
Analysts said sellers were aggressive Monday, while many of the institutional buyers who usually lead the market were sitting out the trading session. They said the market's early declines were hastened by computer-tied "program" trading that kicked in as stock index futures opened at sharp discounts to their underlying cash counterparts.
Flat After Decline
Some analysts were heartened to note that the Dow remained largely flat after the sharp decline in the first hour of trading.
As the market heads into its final three trading sessions of 1987, the Dow could end the year either above or below last year's level. The blue-chip index closed at 1,895.95 in the final trading session of 1986.
Among the hardest hit of individual stocks were technology and drug issues. International Business Machines fell $4.125 to $115.75, Digital Equipment was down $4.50 to $133.125, Merck was off $4.25 to $156.25 and Johnson & Johnson fell $2.50 to $76.875.
Minnesota Mining & Manufacturing gave up $2.25 to $62.875, while Dow Chemical fell $3.75 to $88.25.
Computervision gained $4.25 to $13.25 as Prime Computer launched a $13.50-a-share tender offer for Computervision. Prime's stock lost 87.5 cents, falling to $14.375.
Shares of Kansas City Southern, which had hoped to buy the Southern Pacific railroad from Santa Fe Southern Pacific, were up by as much as $1.875--to $43--in early trading after SFSP announced that it intends to sell the SP to Rio Grande Industries. The stock slid, however, on news that Kansas City Southern intends to pursue an acquisition of Southern Pacific and ended the day up only 12.5 cents, at $41.25.
Southern California Edison was the most active stock in New York Stock Exchange trading, with more than 15 million shares changing hands. Some investors have recently been buying utility stocks to capture their dividends.