Stock and bond prices plunged today despite President Reagan's address to the nation Thursday night, but he said today that the slide was not a "verdict" on the speech or his economic program. "I'm sure not going to take the blame," he told reporters.
The Dow Jones Industrial Average, the most carefully watched barometer of stock market performance, fell 11.13 points to 824.01, its lowest level since May 15, 1980.
Bond prices slumped about $25 per $1,000 bond, and many closed at record lows, according to Andrew Morse of the brokerage firm Drexel Burnham Lambert Inc. Bond owners lost more than $7 billion on paper today.
In the past two weeks the Dow average has dropped nearly 50 points. Since early August, when Congress approved the tax cuts that are the centerpiece of the Reagan program, the Dow has declined about 130 points, amid growing doubts that the administration's goal of a balanced budget in fiscal 1984 can be attained.
Asked whether he took the market's slide as a vote of no confidence in his program, Reagan snapped, "That keeps us even.
"I'm going to go by the phone calls and telegrams that have been coming in since last night's speech, and they are running three to four to one and better in our favor," he said.
Reagan said he didn't understand the market's reaction. "It started yesterday . . . and I guess it's continuing on down.
"I don't know what the reason is," he said.
The White House has been confused and angry at the reaction of the financial markets. Thursday night Reagan promised to cut spending another $13 billion and raise taxes $3 billion to hold the deficit to $42.5 billion in fiscal 1982, which starts Thursday. He hoped to soothe investors, but apparently he failed.
Investors continue to worry that the deficit will grow. The bigger the deficit, most investors believe, the more difficult it is for private borrowers to obtain funds and the more likely it is that interest rates will remain high.
"Furthermore, there is a growing realization that those high interest rates are pulling the teeth out of corporate America and that the nation is ready for a recession," said the director of research at a major brokerage firm. A recession will bring down interest rates, but at the cost of higher unemployment and declining corporate profits.
Analysts said the president's judgment of today's stock and bond slide is in part correct.
"It's a combination of factors," said Leslie Alperstein, director of research for Bache Halsey Stuart Shields Inc., a major brokerage firm. But it began with the Reagan speech, he said.
Alperstein also cited dire predictions by market guru Joseph Granville, who said in Paris that stock prices would drop sharply early next week. A similar pronouncement by Granville triggered a steep decline in January, but investors ignored another Granville prediction of a "March massacre," which didn't occur on cue.
Because the stock market has been declining steadily for several months, many investors who bought stock on credit through their brokers are discovering that the stock is not valuable enough to serve as full collateral on the so-called "margin" loans they took out to buy the stock.
As a result, brokers are calling investors to add more cash or securities to their margin accounts, and many investors are being forced to sell their stocks to pay off the loans, Alperstein said. That adds to the wave of selling on Wall Street.
"If the president had given us a blockbuster speech, however, he might have turned things around. But as far as investors were concerned, it was a non-event," the head of a major brokerage firm said.
"There was disappointment," agreed Richard Hoffman, the chief investment strategist for the nation's biggest broker, Merrill Lynch, Pierce, Fenner & Smith. "The $43 billion deficit number is still not very believable," despite Reagan's avowed intention to boost taxes and trim spending enough to keep the 1982 imbalance at that level, Hoffman said.
Hoffman said the administration's revenue estimates for the next spending year are too high. Even if Reagan succeeds in trimming spending to the level he desires, and it appears he will have a tougher time guiding the additional $13 billion in budget cuts through Congress than he had extracting $35 billion in trims earlier this year, the addition of interest-free All Savers certificates and the expanded authority for individuals to set up tax-free private retirement accounts will have a bigger impact on tax receipts that the administration estimates, Hoffman said.
Although stock prices closed sharply lower today, they rallied near the end of the trading day. While the Dow index closed down 11.13, it had been down nearly 16 points shortly after lunch. Bond prices recovered a little near the close of trading as well, Drexel Burnham's Morse said.
Nevertheless, on the New York Stock Exchange, 1,500 stocks closed the day lower in price than at the start of trading while 150 stocks closed higher.