NEW YORK -- The Dow industrials fell 39.11 yesterday, to close at 2,518.32, in a broad decline as the sagging economy and rising tensions in the Middle East remained keynotes of the market, traders said.
Declines swamped advances on the Big Board by a lopsided 9-2 ratio on moderate volume of 145 million shares, down marginally from 147 million Wednesday.
"There's been no concrete news today to cause a nearly 40-point loss in the Dow," said chief trader Thomas Gallagher at Oppenheimer. "But I think Iraq's most recent revelation that it intends to blow up all the oil fields in the event of war -- [President] Saddam [Hussein] has said this before -- is having a little more effect on the market Thursday than it has in the past."
Moreover, he said, there is continuing talk in the market about low U.S. banking liquidity, reinforced by jitters over the ramifications of the potential bankruptcy of important municipalities, Philadelphia being the most prominent example.
There was also some working out of hedged positions ahead of today's quarterly "triple-witching" expirations of September index futures, index options and common stock options, analysts said.
Analysts generally saw the session as a follow-through from Wednesday, when the negative tone of comments from Federal Reserve Chairman Alan Greenspan, combined with rising tensions in the Middle East, sent the Dow to a 13-point loss, aborting a feeble, two-session rally.
"The market is still digesting Alan Greenspan's congressional testimony of yesterday," said chief trader Kenneth Ducey at S. G. Warburg, referring to the Fed chairman's remarks that the economy could be pushed into recession by high oil prices and that high inflation militated against an easing of monetary policy to avoid such a recession, "and the Middle East is still a powder keg."
Moreover, London's FTSE-100 index was already down a sharp 37 points, at 2028, as New York opened, and finished down 48.9, at 2016.9. Japanese stocks slipped mildly overnight.
The stock of municipal-bond insurer MBIA, an insurer of Philadelphia debt, has been hit hard for two days running, falling more than 3 points both Tuesday and Wednesday. Yesterday, the stock kept sinking and closed off 3, at 25 1/2 , bringing its three-session loss to nearly 28 percent.
There were also some positive surprises in the market. Apple Bancorp opened up 3 3/8 , at 34 1/4 , after a delay in reaction to news that its board of directors has voted to remove the last hurdles preventing major shareholder Stanley Stahl from bidding $38 a share for the company. Apple will terminate two trusts that were set up to handle defensive legal expenses. The stock closed up 5 1/2 , at 36 3/8 , on the composite tape.
But the downward direction of the market as a whole was hardly in doubt, traders said. Broad and significant losses were posted among key stocks in such diverse industry groups as computers, chemicals, steel, drugs, foods, retailers, grocery, cosmetics, shoes, insurance, financial services and banks.
Among the computer-makers, Digital Equipment fell 1 7/8 , to 53 3/4 ; Compaq Computer tumbled 2 3/8 , to 42; Cray fell 1 1/2 , to 33 1/4 ; Hewlett-Packard was off 1 3/8 , to 32; and Honeywell dropped 3 3/8 , to 88 3/4 . IBM slipped only 1/2 , to 107 7/8 .
Food stocks were broadly sold as well. CPC International gave up 1 3/4 , to 75 1/8 ; Ralston Purina lost 2 7/8 , to 97 1/8 ; and Campbell, Castle and Cooke, General Mills, Quaker Oats and Dekalb each lost a full point.
Drug stocks did poorly as Dow component Merck slipped 1 1/8 , to 75 3/4 ; Lilly fell 1 3/4 , to 70 1/8 ; Pfizer lost 1, to 70 3/4 ; Schering-Plough slipped 1, to 42 7/8 ; Warner-Lambert dropped 1 3/4 , to 59 1/2 ; and Syntex lost 1 1/4 , to 53 3/8 .