The stock market started off a new week with another "blue Monday," falling sharply in selling attributed to interest-rate worries and program trading.
The Dow Jones average of 30 industrials fell 36.14 to 1,773.90, for its seventh-largest point loss ever and its biggest since it took a record 61.87-point drop on July 7.
New York Stock Exchange volume came to 127.99 million shares, against 131.96 million on Friday.
Interest rates rose in the credit markets today, sending prices of long-term government bonds down as much as $20 for every $1,000 in face value.
Analysts said bond market weakness pressured stock prices early in the session. The weakness then spread to the stock index futures, which began trading at a discount to their underlying baskets of cash equities.
As the index futures declined, professionals engaged in the practice known as program trading stepped in to buy the futures and sell corresponding "baskets" of stocks that make up the indexes.
"The weakness in the bond market along with all these sell programs knocked the stuffings out of us today," said Ralph Acampora, chief technical analyst at Kidder, Peabody. "Internally, the market just isn't strong enough."
Acampora said he expects short-lived rallies and choppy trading to characterize the market, separating weak stocks from the strong. But he said this period would provide selective buying opportunities for investors seeking quality stocks at good prices.
"A short-term trader has to be looking over his shoulder at all times because this is a very treacherous phase," he said, "but the investor wanting to pick up quality stocks at a good price will be able to select some good buying opportunities."
On the trading floor, Southern Co. was the most active NYSE-listed issue, falling 1/2 to 25 3/8.
Safeway followed, gaining 4 5/8 to 66 1/2. The nation's biggest supermarket chain agreed to a $69-a-share takeover offer from the investment firm of Kohlberg Kravis Roberts.
AT&T was third, off 1 to 23 1/4.
Other utilities lost ground after advancing last week. Middle South Utilities fell 1/4 to 13 1/8, Southern California Edison fell 1 to 34 3/4, Public Service Co. of Indiana dropped 3/8 to 13, Boston Edison lost 3/8 to 52 1/2 and Consolidated Edison dropped 1 1/8 to 49 1/4, American Electric Power 1/2 to 79, and Philadelphia Electric 1/8 to 22 1/2.
Dow Jones' average of 15 utilities dropped 4.44 points to 203.01, a 2.14 percent decline that slightly exceeded the industrial average's 2 percent loss.
In the past couple of months, as the market has encountered rough going, it has had some especially tough times on Mondays. The Dow Jones industrial average recorded losses of 45.75 points on June 9; 15.28 on June 23; the record loss on July 7, and 27.98 points July 14.
Among actively traded blue chips in the latest Monday sell-off, General Motors fell 2 3/4 to 69; International Business Machines 1 3/4 to 132 3/8 and Ford Motor 1 3/8 to 55 5/8.
Hammermill Paper rose 1 1/4 to 55 on top of a 5 3/8 gain Friday. Analysts said Hammermill may consider a leveraged buyout or look for a white knight to counter a hostile $52 a share takeover bid from a group led by California investor Paul Bilzerian.
Allied-Signal rose 1/2 to 42 1/2 after climbing Friday. Traders cited expectations that the company would buy back as much as 25 percent of its outstanding shares as part of a restructuring.
The technology sector was mixed. Burroughs fell 1 3/8 to 66 1/4 and Cray Research dropped 2 to 87 7/8 while Digital Equipment rose 1 to 88 1/2 and Texas Instruments added 1 to 109 7/8.