Dow Dips 5 as Investors Await Economic Data

NEW YORK —  Sporadic selling pushed stock prices lower Monday in the lightest trading in more than two months while investors were sidelined waiting for economic indicators due at the end of the week.

The Dow Jones index of 30 industrials, down more than 20 points at mid-session, closed with a 5.13 loss at 2,704.41.

The index fell 42.55 last week.

Big Board volume totaled 126.02 million shares, down from 154.09 million Friday and the lightest total since 68.87 million were traded July 3.

Analysts said buying interest was limited, as it had been last week, by concern that the market was due for at least a pause after its sharp rise through the first eight months of the year.

There has also been much talk on Wall Street that the Federal Reserve will be reluctant to relax its credit policy any further over the next several weeks.

Fed policy-makers are believed to be satisfied that the risk of a recession has been averted for now, given recent data that showed a stronger-than-expected pace of business activity.

Among actively traded blue chips, American Telephone & Telegraph rose 7/8 to 40, General Electric gained 1/8 to 56 5/8 and Exxon added 1/4 to 44 5/8. But General Motors dropped 5/8 to 49 1/4 and Eastman Kodak was down 1/8 at 49 3/4.

Manufacturers Hanover climbed 2 7/8 to 42 1/2. The company said it was engaged in talks that might lead to the acquisition of a part interest in its CIT Group subsidiary by Dai-Ichi Kangyo Bank Ltd.

Universal Foods fell 5/8 to 34 1/8 in active trading. High Voltage Engineering said it ended a bid to acquire the company.

Ask Computer Systems fell 2 1/4 to 8 3/8 in the over-the-counter market. The company said it expects to report substantially lower earnings for its fiscal first quarter that ends Sept. 30.

Declining issues outnumbered advances by close to 9 to 5 in nationwide trading of New York Stock Exchange-listed stocks.

On the Tokyo Stock Exchange, index-linked buying by a major foreign securities house pushed the Nikkei average up near the close to end barely changed after being lower most of the day. The Nikkei 225-share eased a bare 2.15 points to close at 34,113.66.

In London, stock prices ended lower after Wall Street started weakly, dealers said. The Financial Times 100-share index closed off 23.3 at 2,400.6.

Credit

Bond prices rose in light trading, and demand for three-month Treasury bills depressed their yields to the lowest levels in nearly a year.

Many traders stayed out of the market while awaiting economic reports due later this week.

The Treasury’s benchmark 30-year bond rose 1/8 of a point, or $1.25, per $1,000 face amount. Its yield slipped to 8.07% from 8.08% late Friday.

“Trading has been very lethargic,” said Elliott Platt, a fixed-income researcher for Donaldson, Lufkin & Jenrette Securities Corp.

The Commerce Department’s August retail sales figures will be announced Thursday, and on Friday, reports are due on the July trade deficit figures and August producer prices.

Opinion is divided on whether the economy is slowing to an extent that the Fed would be encouraged to loosen credit conditions another notch, driving interest rates lower and bond prices higher.

In the secondary market, yields on previously auctioned three-month Treasury bills fell to 7.89% as the discount lost 11 basis points to 7.65%.

Yields on previously auctioned six-month bills fell to 8.02% as the discount dropped 15 basis points to 7.62%. Yields on one-year bills fell to 8.06% as the discount fell 9 basis points to 7.52%.

A basis point is one-hundredth of a percentage point. The yield is the annualized return on an investment in a Treasury bill. The discount is the percentage that bills are selling below the face value, which is paid at maturity.

The federal funds rate, the interest on overnight loans between banks, was quoted at 8.875%, down from 8.938% late Friday.

Currency

The dollar closed mostly lower amid profit taking on domestic markets after rising overseas.

Analysts said the dollar’s upward momentum was slowed by increases in market interest rates in other countries, including West Germany, and U.S. traders, fearing that the dollar would decline in response to those developments, rushed to take profits.

“Interest rate differentials begin to work against the dollar at this level,” said Ronald Holzer, chief dealer for Harris Trust & Co.

However, Holzer said the dollar still had a firm undertone.

In earlier overseas trading, the dollar rose, but dealers said the upcoming economic reports from Washington have made traders reluctant to push the U.S. currency much higher.

“Anyone buying dollars at this stage, ahead of the numbers later this week, is taking a big risk,” said a U.S. investment bank dealer in London.

The dollar fell against the British pound in New York. It cost $1.5460 to buy one pound, compared to $1.5380 on Friday. In London earlier, a pound cost $1.5450, cheaper than $1.5505 late Friday.

In Tokyo, the dollar rose 1.15 Japanese yen to a closing 147.77 yen from Friday’s 146.62 yen. Later, in London, it was quoted at a lower rate of 147.65 yen, and in New York, it fell to 146.70 yen from late Friday’s 147.20 yen.

Commodities

Prices of copper futures rose sharply on New York’s Commodity Exchange in a volatile session that saw the price for December delivery whipsawed over a range of more than 6 cents a pound.

On other markets, precious metals futures fell, energy futures were mixed, grains and soybeans were mixed, and livestock and meat futures were mixed.

Copper futures settled 3 to 3.1 cents higher, with the contract for September delivery at $1.303 a pound. The more actively traded December contract settled at $1.256 after trading between $1.19 and $1.257 a pound.

Prices nose-dived at the opening in reaction to the London Metal Exchange’s report that copper stocks in the exchange-approved warehouse had risen last week by 4,800 metric tons, an unexpectedly large increase.

The big buildup in LME stocks appeared to contradict the tight-supply fears that have provided the main support for copper’s price during the past 1 1/2 months.

But the market bottomed out quickly, rallied steadily and ended with a strong burst of buying by some of the same speculative funds that had sold the market earlier in the day.

“The decline was probably excessive,” said Bette Raptopoulos, metals analyst with Prudential-Bache Securities in New York.

Analysts could not agree on a reason for the turnaround. William O’Neill, director of research with Elders Futures, cited strong buying by the Japanese, who have been hit hard by the two-month shutdown of the Bouganville copper mine in Papua New Guinea.

Continued violence in that area Monday reinforced predictions that production at Bouganville will not resume this year.

Meanwhile, a 9-week-old old strike at a Highland Valley Copper Co. mine in British Columbia continued Monday, and a strike at Chilean Copper Co.’s El Salvador mine entered a second week after workers there voted against a settlement offer.

O’Neill said copper’s fundamentals were still supportive despite the market’s retreat from about $1.37 a pound, a decline of about 5%, in the past two weeks.

Precious metals futures slipped on the Comex. Gold settled 20 to 50 cents lower, with October at $360.90 an ounce; silver was 0.2 to 0.8 cent lower, with September at $5.051 an ounce.

Energy futures ended mixed in choppy trading on the New York Mercantile Exchange after a sharp rally last week.

Andrew Lebow, a senior trader with E. D. & F. Man International Futures, said concerns of overproduction among members of the Organization of Petroleum Exporting Countries put a damper on Monday’s trading.

West Texas intermediate crude oil settled 1 cent higher to 7 cents lower, with October at $19.76 a barrel; heating oil was 0.48 to 0.73 cent lower, with October at 56.01 cents a gallon, and unleaded gasoline was 0.02 to 0.70 cent lower, with October at 57.07 cents a gallon.

Grain and soybean futures prices finished mostly lower on the Chicago Board of Trade amid forecasts for drier weather in the Midwest and fading fears of an overnight freeze in important corn and soybean areas.