The roller-coaster stock market and the blue-chip stocks that have lifted it dramatically over the past week pulled back sharply today as the Dow Jones Industrial Average fell by 18.21 points. It was the steepest one-day decline in the industrial average since February.
Analysts said the market's performance could be expected after the gains of the past week. The declines pulled the Dow industrials below the 1,000 mark, with that key market barometer closing today at 996.87.
Volume on the New York exchange totaled 107.5 million shares, down from nearly 140 million shares traded Wednesday, the market's second-busiest day in history. Nationwide turnover in NYSE-listed issues totaled 127.14 million shares.
"The market is overbought right now. The leadership stocks will continue to be leaders, but for the short to intermediate term, they became quite extended and were hit with some profit taking," said Richard Yashewski, senior vice president of Butcher & Singer Inc. "They may have seen their price highs for the next two months."
Much of the profit taking late in today's session was prompted by the prediction from First Boston Corp. economist Albert Wojnilower that the cuts in interest rates had reached close to their bottom, and increases could be in line next year.
There were broad losses among the 30 stocks that make up the industrial average, with 23 declining, 3 advancing, and 4 unchanged. The New York composite index fell 1.07 points to 77.23 and the average price per share dropped by 44 cents, as 743 stocks advanced and 974 declined.
Among the New York exchange trading leaders, International Business Machines Corp was off 1 7/8, closing at 80 1/8; Eastman Kodak was down 3 3/8 at 89; General Electric fell by 1 7/8, closing at 52 1/8; and American Telephone & Telegraph was off 1, closing at 59 1/2.
The American Stock Exchange index fell only slightly as a number of technology and oil stocks turned in gains. The Amex index closed at 314.39, down 0.40 point. Volume totaled 10.3 million shares, down from 11.5 million yesterday, and the average price per share fell two cents, as 376 were up, while 295 declined.
On the over-the-counter market, losses were also slight, as the NASDAQ composite index fell 0.32 point to 204.85.
Meanwhile, the dollar surged against the major currencies in New York today, propelled by short-covering. One dealer said that much of the short-covering came after the market sensed that the Federal Reserve wouldn't add reserves to the banking system.
Bond prices fell in moderate trading, despite predictions of further declines in short-term interest rates.
Long-term U.S. Treasury bonds slipped as much as $13.75 for each $1,000 in face value.
But the declines came after the bellwether issue for long-term interest rates had surged up nearly $350 since June.