The money supply measure M1, which includes cash, checking accounts and NOW (negotiated order of withdrawal) accounts, rose $600 million during the week ended June 22. The figure was reported incorrectly yesterday.
Continuing fears about rising interest rates and last week's drop in the money supply hit the stock and bond markets hard today, and the Dow Jones industrial average fell by almost 17 points.
Although stocks in virtually every economic sector lost ground and 26 of the 30 stocks that make up the Dow's industrial average fell while only one gained, volume on the New York Stock Exchange was a relatively light 67.3 million shares, just above last Friday's total of 65.1 million.
In light of slight jumps in interest rates, most market analysts expect stocks to continue in the rather lackadaisical, slightly downward pattern of recent weeks. "Until there is a clear sign from the Fed on rates, the market will move through choppy waters," said Monte Gordon, director of research at Dreyfus Corp.
Since the industrial average closed at an all-time high of 1,248.30 almost three weeks ago, that key market barometer has lost nearly 40 points. The industrial average closed today at 1,208.53, after being as low as 1,200 this afternoon.
"What's at the bottom of Wall Street's fear is the fact that, if the economy continues to boom, then you may have competition in the marketplace between the government and corporations, and that could lead to higher rates," said William LeFevre, vice president-investment strategy at Purcell Graham & Co.
The concerns on Wall Street about Federal Reserve Board policy were heightened by the smaller-than-expected $600 million decline in the money supply for the week ending June 22 and the $17 billion gap between that indicator's performance and the Fed's target for June. Bond prices fell today, as they did Friday when the figures were announced. Similar interest rate concerns were responsible for the federal funds rate rising today to 9 1/2 percent from an opening of 8 7/8 percent.
Moreover, some Wall Street economists are predicting that the Fed might raise the discount rate to cool the expanding economy. The stock market would view that move very negatively, but few analysts expect such a Fed move any time in the immediate future.
The losses were sharp today, particularly because the session followed a holiday weekend.
Among widely traded stocks, Chrysler fell 1 1/8 to 30 5/8, American Telephone & Telegraph dropped 1 1/4 to 63 1/4, and International Business Machines closed at 118 7/8, down 2 1/8.4130:Charts 1 and 2, TRACKING THE DOW; DAILY FLUCTUATIONS, By Kathy Jungjohann for The Washington Post; Chart 3, THE MARKET