NEW YORK Interest-rate forecast causes heavy drop

Press, 7 May 1984, Page 30

NEW YORK Interest-rate forecast causes heavy drop

NZPA-AP New York The New York stock market dropped heavily on Friday, confronted with a new forecast of higher American interest rates. The Dow Jones average of 30 industrials fell 16.22 points to 1165.31, finishing the week with a net loss of 3.76 points. Declines outpaced advances more than two to one on the New York Stock Exchange. At mid-morning, Dr Henry Kaufman, an economist at Salomon Brothers* financial house, said it was likely that American interest rates would go “spectacularly higher” by next year unless strong measures were taken to narrow the Federal Budget deficit.

“Interest rates will be the only disciplining force for the economy as we move to a higher level of activity in this business expansion,” Mr Kaufman told a bankers’ group in Fort Worth, Texas. Interest rates have already risen substantially from their lows last year. In the economic news, the Government reported that the United States civilian

unemployment rate hald steady at 7.8 per cent in April. A survey of corporate purchasing executives found continued strong growth in the economy last month. Stock prices gave ground on Thursday, pausing after the recent rally that carried the market to a three-month high. The Dow Jones dropped 5.03 points to close at 1181.53.

On Wednesday, the Dow Jones had climbed to a three-month high.

Eastman Kodak stood out among the blue chips on Thursday, jumping three points to 64% on upbeat earning news.

The Dow Jones average of 30 industrials rose 3.56 points to 1186.56, bringing its gain since the start of the week to 17.49 points. That marked the average’s highest close since it stood at 1197.03 on February 3. Analysts said traders seemed to have grown more hopeful that economic expansion would settle down to a pace that could be sustained for some time to come.

After the close, the Treasury said it would sell $16.5 billion worth cf bonds and notes in its quarterly sale, this week. The total

was in line with advance expectations. The Dow Jones rose 12.25 points on Tuesday at 1183, its highest since March 16.

On Monday, stock prices had shown little change as traders assessed new evidence that the American economy was slowing. Before the opening on Monday the Government reported that the index of leading United States economic indicators fell 1.1 per cent in March. It was the first drop in the index, which is designed to detect future economic trends, since August, 1982. The Commerce Department also said sales of new single-family houses dropped 4.9 per cent, after adjustment for seasonal factors, in the same month.

Analysts said neither figure came as a great surprise to investors. Many observers have said that adverse weather in March has helped make it difficult to evaluate the significance of the weakness in economic data for the month.

Closing prices on Friday for a selection of American stocks were:—

Alcan Alu, 28%; Alcoa, 34; Amerd Hes, 31%; ABC, 58%; Am Express, 30%; Am Motors,

4%; ATT, 16%; Armco, 19; Asarco, 29%; Atl Rich, 46%; Beth Stl, 23%; Boeing, 38%; Borden, 55%; Burroughs, 52%; Chrysler, 23%; Citicorp, 34%; Coca Cola, 56%; Colgate, 25%; CBS, 73; Conti Grp, 35%; Crane, 35%; Dar and Krft, 74%; Digital, 94; Disney, 64%; Dome Mines, 13%; Dow Chem, 31%; Du Pont, 49%; East Kodak, 66; Englhrd, 29%; Exxon, 42%; Firestone, 17%; Fluor, 20%; Ford, 35%; Frpt McMor, 22%; Gen Dynam, 49%; Gen Elec, 54%; GM, 64%; Goodyear, 26%; Greyhound, 23%; Grumman, 25%; Gulf Oil, 79%; Haliburton, 40%; Homestake, 30%; Honeywell, 55%; IBM, 112%; ICN Pharm, 6%; Int Harv, 7%; Inco, 12%; ITT, 36%; Levi Str, 34%; Manville, 10%; Jhsn Jhsn, 36%; Kaiser Alu, 15%; K Mart, 27%; Lockheed, 36; Martin-M, 34; McDonald’s, 66%; McDon Doug, 51%; MGM Film, 15%; M-M-M, 75%; Mobil, 30%; Monsanto, 93%; NCR, 107; Newm Min, 48%; Pfizer, 34; Phel Dodge, 22%; Philip M, 66; Phil P, 40%; Pittston, 13%; Polaroid, 28%; RCA, 35; Raytheon, 39%; Reyn Met, 30%; Royl DPet, 51%; Seagrams, 34%; Sears Roe, 32%; Shell Oil, 58%; Shell, 36%; Sperry Cp, 39%; St Oil Cal, 37%; St Oil Ind, 53%; S Oil Ohio, 45%; Texaco, 40%; Texas Inst, 143%; Union Cal, 56; US Steel, 29%; Westg Ele, 46; W’wths, 35%; Xerox, 40%; Schlumberger, 51%; Sedco, 37%; Merril Lynch, 24%; Occidental, 30%; Heinze, 33%; Cleveld Cl, 21%; Int-Nth, 40%; Am Airlines, 27%.