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Stocks Fall Broadly; Dow Loses 20

July 28, 1988|From Times Wire Services

NEW YORK — Stock prices closed broadly lower Wednesday, hitting their lowest level in nearly two months as blue chips fell sharply in late trading due in part to futures-related program selling.

The Dow Jones index of 30 industrials dropped 20.27 to 2,053.70, its lowest close since it stood at 2,052.45 on June 2. From the 1988 closing high of 2,158.61 it reached on July 5, the Dow has fallen 104.91 points.

Traders said a sharp drop Wednesday in bond prices, which fell after news of a bigger-than-expected rise in inflation as measured by the gross national product, also weighed down stocks.

Action by the Federal Reserve to drain reserves from the banking system was an added pressure, analysts said.

"That was interpreted as tightening," said Edward Shopkorn, general partner in charge of institutional equities at Mabon Nugent. "The market is totally afraid of inflation."

Declining issues outnumbered advances by nearly 2 to 1 in nationwide trading of New York Stock Exchange-listed stocks. Big Board volume came to 135.89 million shares, against 121.96 million in the previous session.

Negative Reaction

The markets appeared to welcome news of a 3.1% rise in second-quarter gross national product, traders said, with stocks gaining on the report. There had been some concerns leading up to the release of the data that an overly large increase would prompt Federal Reserve credit tightening.

But bond prices fell on the 4.1% rise in the implicit price deflator, which came in a little higher than expected.

"Obviously the bonds reacted negatively to the GNP news," said Rao Chalasani, market strategist with Prescott Ball & Turben. "Short-term rates going up was perceived as a negative, and I believe the market is looking for a discount rate increase."

Without direction and support from the bond market, Shopkorn said, "the stock market doesn't have enough juice to make it on its own."

Eastman Kodak rose 5/8 to 43 as the company reported second-quarter earnings of $1.20 a share, up from $1.06 a year ago.

Bethlehem Steel added 1/2 to 24 3/4 on higher second-quarter operating earnings.

But other blue chips didn't fare so well in the prevailing atmosphere of caution and apathy. International Business Machines dropped 1 1/2 to 121 1/8, Procter & Gamble fell 1 5/8 to 71 3/4, International Paper was off 1 5/8 to 52 5/8, Hewlett-Packard dipped 1 3/8 to 48 3/8 and Philip Morris edged down 1 to 89.

Liz Claiborne fell 2 to 14 as the most active issue in the over-the-counter market. Late Tuesday, the company reported lower second-quarter earnings.

Indicators Drop

Shaklee, traded on the Big Board, dropped 1 to 19 5/8 on word that per-share profit for the second quarter declined to 20 cents from 42 cents in the 1987 period.

Zayre, caught up in takeover speculation, climbed 1 3/8 to 21 7/8.

The Wilshire index of 5,000 equities closed at 2,629.233, down 22.364.

The NYSE's composite index of all its listed common stocks fell 1.29 to 148.74.

Standard & Poor's industrial index dropped 3.30 to 303.15, and S&P's 500-stock composite index was down 2.69 at 262.50.

The NASDAQ composite index gave up 2.47 to 383.32; the American Stock Exchange market-value index closed at 302.85, down 1.79.

In Tokyo, share prices closed higher Wednesday as a rush of fresh cash from investment funds went after a variety of stocks on the first day of trade for August settlement, but investors remained somewhat cautious.

The Nikkei 225-share index rose 434.81 to close at 27,738.57.

Prices edged higher Wednesday on the London Stock Exchange after long-awaited British and U.S. economic reports failed to send any clear-cut signals to the stock market. The Financial Times 100-share index closed up 3.1 at 1,840.8.

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