NEW YORK — Stock prices closed sharply lower Monday as traders cashed in some of the gains that carried the market to new post-crash highs last week.
The Dow Jones index of 30 industrials, up 49.70 points on Friday, dropped back 20.49 to 2,511.38.
Declining issues outnumbered advances by about 4 to 3 in nationwide trading of New York Stock Exchange-listed stocks.
Volume on the floor of the Big Board declined to 143.60 million shares from Friday's 198.72 million.
The market's climb last week to new peaks since the debacle in the fall of 1987 was spurred by accumulating evidence of a slowing economy.
As interest rates fell in the credit markets, rumors circulated that the Federal Reserve might soon lower its discount rate, the charge it sets on loans to private financial institutions.
The Fed took no such step immediately, however, and traders began the new week in a more cautious mood.
Brokers also noted that the market was running out of support from "window dressing" by money managers at investing institutions readying their portfolios for midyear reports to clients.
The light volume fit a recent pattern. Monday has been the slowest session of each week so far in June.
Time Inc. fell 1 7/8 to 164 after trading early in the session as high as 172 1/4. Late Friday, Paramount Communications, bidding to wrest Time away from a planned merger with Warner Communications, increased its offer for Time to $200 a share from $175.
Paramount gained 2 3/8 to 60 3/8 and Warner rose 1/4 to 58 7/8.
Losers among the blue chips included Philip Morris, down 1 5/8 at 140 7/8; Coca-Cola, down 1 at 58 7/8; Procter & Gamble, down 1 1/8 at 113 3/8; General Electric, down 5/8 at 54 1/8, and USX, down 2 1/4 at 34 3/4.
Hasbro, among the American Stock Exchange volume leaders, gained 1/4 to 22 1/4. The company was discussed as a possible takeover candidate after the news of the death of Stephen D. Hassenfeld, its chairman and chief executive.
In foreign trading, Japanese stocks closed firmer in slow trading as dealers tried to boost the market by stirring up interest in large-capital stocks, brokers said. The 225-share Nikkei index gained 95.11 points to close at the day's high of 33,625.82.
The London Stock Exchange shrugged off further weakness in the British pound to close higher. At the close, the Financial Times 100-share index was up 12.1 points at 2,179.6.
Government bond prices climbed in buying inspired by a rebound in the dollar and evidence of slower economic growth.
All maturities of government securities ended higher but below the peaks reached early in the session. Long-term issues turned in the best performance.
The credit market's bellwether bond, the 30-year Treasury bond, rose 7/16 point, or $7.375 for every $1,000 in face value. Its yield, which moves in the opposite direction from price, declined to 8.15% from 8.19% late Friday.
Irwin L. Kellner, an economist with Manufacturers Hanover Trust, said: "The bond market continues to react favorably to growing signs that the economy is slowing down."
He said the market's latest wave of optimism was generated by government reports Friday indicating slower economic growth, which raised hopes for a moderation in inflation and a decline in interest rates.
The late quote for the federal funds rate, the interest on overnight loans between banks, was 9.50%, the same as Friday's late level.
The dollar made solid gains, but traders said its rise was somewhat timid because the foreign exchange markets remain wary of renewed central bank intervention.
"Long term, people are bullish. Short term, they're worried about what the (central) banks are up to," said one New York dealer.
Dealers said there were reports of dollar selling by the Federal Reserve, but that had little effect on the market.
The dollar rose in New York, extending its earlier gains in Europe and Asia, as participants tested the waters after the currency's fall Friday, traders said. But they added that the rally ran into resistence at around 1.96 West German marks.
The dollar finished at 1.9570 marks, up from 1.9430 at Friday's close, and at 141.20 Japanese yen, up from 138.85.
The British pound, meanwhile, came under continued selling pressure despite intervention by the Bank of England.
In London, it cost $1.5450 to buy one pound, cheaper for buyers than $1.5675 late Friday. Later, in New York, sterling fetched $1.5447, down from 1.5645.
In Tokyo, where trading ends before Europe's business day begins, the dollar fell 0.17 Japanese yen to a closing 140.18 yen. It was quoted higher at 140.65 yen in London, and at 141.10 yen in New York, up from 138.85 yen late Friday.
Gold prices declined. Republic National Bank of New York quoted an ounce of gold at $374 as of 4 p.m. EDT, down $3 from late Friday.
Coffee futures prices sagged to an 11-month low on New York's Coffee, Sugar & Cocoa Exchange amid growing pessimism about the International Coffee Organization's ability to keep its grip on price controls.
On other markets, orange juice futures soared, corn and soybean futures dropped while wheat advanced, livestock and meat futures rallied, oil futures rose and precious metals slumped.
Green, unroasted coffee settled 1.63 cents to 6.05 cents lower, with the contract for delivery in July at $1.11 a pound, the market's lowest close since Aug. 2, 1988.
The selloff was sparked by news Friday that Colombia, the world's second-largest coffee producer, would move to abolish all export quotas unless members of the International Coffee Organization approve a new price-support agreement at their meeting next Monday in London.
Orange juice futures settled at or near the 5-cents-a-pound daily limit on the New York Cotton Exchange despite a lack of fresh supply-and-demand news. The market has been rising on supply concerns linked to the slow pace of the Brazilian orange harvest.
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