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Stocks swung wildly today, as good news

August 13, 1997

NEW YORK (AP) _ Stocks swung wildly today, as good news on the economy was alternately celebrated and ignored by manic-depressive investors.

According to preliminary numbers, the Dow Jones industrials ended down 32.52 points at 7,928.32.

In the first hour of trading, the blue-chip index charged higher by 80 points and plummetted to down 70 points, then bounced between negative and positive territory for the rest of the session.

Declining issues had a very narrow lead on advancers on the New York Stock Exchange, where volume was moderate but above Tuesday’s pace.

But broad-market indexes ended mostly positive, except the American Stock Exchange composite index, which ended lower.

Bonds were equally volatile in the morning but settled down in the afternoon. The 30-year Treasury bond was up 1/2 point and yielding 6.63 percent, down from 6.67 percent late Tuesday. Bonds shot up more than a point this morning, slipped into negative territory and then climbed back, taking stocks with them.

Causing the dramatic swings were two separate government reports on the economy. The Labor Department said that prices paid to factories and to other producers inched down by 0.1 percentage point in July for the seventh straight month. Economists had predicted a rise by 0.1 percent.

That was good news because it showed that inflation, a big concern for bond investors, is under control.

The Commerce Department reported at the same time that retail sales rose 0.6 percent in July, the second consecutive increase. That was about in line with expectations. But Commerce revised a previously reported gain in retail sales for June to up .7 percent from up .5 percent.

“If these strong demand-side pressures continue, given the tight labor market we have and the rambunctiousness of labor in recent weeks,... you can’t rule out a tightening in the third or fourth quarter,” said Anthony Chan, chief economist at Banc One Investment Advisors in Columbus, Ohio.

Fed policy-makers meet next Tuesday to decide whether to increase short-term rates in a bid to cool inflation. Any suggestion this week that inflation is already under control could prevent such a tightening.

The markets will get perhaps a clearer look at inflation at the consumer level with the release on Thursday of the Labor Department’s consumer price index for July.

Brian Belsky, managing director at Dain Bosworth Inc. in Minneapolis, said he expects today’s volatility to continue throughout the week, and possibly even worsen on Thurday because of a triple expiration of options and futures contracts set for Friiday.

But, “the true direction will be decided tomorrow” with the release of more economic data, including the consumer price index for July. “We’ve set the table today for what will likely be an even more volatile session tomorrow.”

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