Stocks fall in slow trading Dow index drops 27 points

WALL STREET

May 29, 1993|By Bloomberg Business News

NEW YORK -- Stock prices tumbled yesterday in the slowest trading in two months amid pessimism about the economy and the prospects for federal deficit reduction.

The Dow Jones industrial average slid 27.40 from Thursday's record high of 3,554.83, to close at 3,527.43. The average was up 34.60 points for the week. Yesterday's decline was led by Aluminum Co. of America, Caterpillar Inc., and International Paper Co.

Broader market indexes also retreated. Standard & Poor's 500 fell 2.20, to 450.21. The Nasdaq Composite Index, dragged down by a 30 percent plunge in 3Com Corp., shed 4.06, to 700.53.

Stocks opened lower after President Clinton's deficit-reduction bill won a narrow 219-to-213 victory in the House of Representatives, only to face a tougher fight in the Senate. The bill would raise taxes and cut spending by $337 billion over the next five years.

"The big focus is on the deficit package right now," said Ronald Doran, director of institutional trading at C. L. King & Associates. "Everybody is hopeful we'll get deficit reduction," he said. "The question mark is will it make it through the Senate, and how watered down will it get?"

Meantime, the Commerce Department said the economy expanded at a revised 0.9 percent annual rate in the first quarter, the slowest pace since late 1991. Analysts had predicted growth of 1.4 percent.

The gloom was reinforced when the University of Michigan's final consumer sentiment index for May came in at 80.3, down from 85.6 in April, according to individuals with access to the survey.

Treasury bonds tumbled 5/8 as investors brushed off news of anemic economic growth to worry instead about the slide in the dollar and the outlook for deficit reduction, traders said. The plunge drove the yield on the benchmark 30-year bond to 6.98 percent, up five basis points from Thursday.

The surge in Treasury bond yields touched off computer-guided sell orders for stocks around midday, driving prices to session lows. "The computer selling and the bond market helped to kick this market down," said Mr. Doran of C. L. King.

Declining common stocks outnumbered advancers 4-to-3 on the New York Stock Exchange. About 208 million shares changed hands on the Big Board, the lightest turnover since 199.9 million shares traded March 29. Average daily NYSE volume this week has been 246 million shares.

LTV Corp., 3Com Corp., Nona Morellis II Inc., Novell Inc., and Hollywood Casino Corp. Class A shares were the most actively traded stocks on the U.S. composite list.

Electrical equipment, telecommunications, semiconductors and major regional banks -- among this week's biggest gainers -- fell the most in the S&P 500 yesterday.

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