Tumultuous Day For Stocks; Personal Income and Spending Weak; Car Sales Down
Undated (AP) _ Wall Street is taking a weekend respite from one of the stock market’s wildest days in which the Dow Jones industrials tumbled after swinging like a yo-yo and the number of shares traded hit an all-time high.
After rising more than 60 points and falling 100 points, the market’s best- known indicator ended Friday with a loss of 44.15 points to 2,101.52, its fourth-biggest decline, nearly erasing a record 51.60-point rise Thursday.
Volume on the New York Stock Exchange totaled a record 302.39 million shares, stunning traders on the floor of the giant computerized securities market. The figure topped the previous high of 253.12 million set Jan. 15.
″Every trader is incredibly busy when it’s like this, particularly when you have major reversals in the market,″ said Michael Creem, a stock specialist for the New York firm of Mercator Partners.
″You don’t know how far it’s going, and you have to be there to buy stock on the way up and sell on the way down,″ he said. ″It’s very scary.″
The pace of trading was so fast that it took computers more than an hour to tabulate final results after the closing bell.
It capped a wild week in which a growing number of investors poured money into stocks with near-reckless intensity, fearing they would be left behind if a rally that began with the new year should continue indefinitely.
Many analysts have noted there is little fundamental economic news driving the stock market, raising questions about the underlying strength of the 1987 rally and how long it will last.
In fact, the dollar has dropped sharply in value since last month, partly reflecting world concern over soaring U.S. deficits. Developments elsewhere in the economy have suggested slow growth and possible signs of recession.
On Thursday, the Commerce Department said the economy grew only 2.5 percent last year and 1.7 percent in the last quarter, much lower than forecasts the Reagan administration had made. Economists generally blame the weakness on problems among U.S. manufacturers and farmers, hurt by foreign competition.
The Commerce Department said Friday that personal spending jumped 2 percent last month, the biggest rise in 11 years. But private analysts weren’t impressed, saying it came from a jump in car purchases by consumers who wanted to qualify for the sales tax deduction, ended Jan. 1 under the new tax law.
The department also said consumer incomes rose 0.8 percent. This also was dismissed by private economists, who said much of the strength came from a huge increase in government subsidy payments to farmers. Without the farm aid, incomes would have risen only 0.2 percent last month.
Growth in wages and salaries, considered the key income category, rose just 0.3 percent in December, matching weak gains in recent months.
″Wage growth has been very anemic and this will be a real constraint on future spending increases,″ said Bruce Steinberg, senior economist at Merrill Lynch & Co., the New York-based investment firm.
Many economists have expressed concern over an impending drop in consumer spending, which accounts for two-thirds of all U.S. economic activity. This has raised fears of a possible recession, though nobody is forecasting one.
One sign of a decline in spending came Friday from Detroit, where domestic automakers said U.S. sales fell 36.9 percent in mid-January from a year ago, when sales were boosted by heavy cut-rate loan financing. The decline also reflected the late 1986 rush to buy cars before the new tax law took effect.