Market Extends Loss String; Dow Dips 5.41

NEW YORK — The stock market posted its fifth consecutive loss Wednesday in the wake of Citicorp’s decision to add $3 billion to its reserves against bad foreign loans.

The Dow Jones average of 30 industrials slipped 5.41 to 2,215.87, bringing its decline during the past five trading days to 113.81 points. Other market indexes were down for a fourth straight day.

Volume on the New York Stock Exchange stepped up to 206.83 million shares from 175.35 million Tuesday.

After the close on Tuesday, Citicorp announced the increase in its loan-loss reserves, saying it would result in a loss of $2.5 billion for the second quarter.

The market’s drop late in Tuesday’s session was attributed to rumors and speculation about what the big bank holding company was about to do. The news served to focus fresh attention on the international debt situation and the potential problems it poses for the banking system.

However, several Wall Street analysts applauded Citicorp’s action, arguing that it was a prudent move that effectively reduced the company’s exposure to risk of default on the loans in question.

Citicorp shares, which fell 1 5/8 Tuesday, rebounded 2 1/2 to 53 1/8 after a delayed opening.

Among other leading money-center bank issues, J. P. Morgan rose 7/8 to 42, and Chase Manhattan gained to 34 7/8. Manufacturers Hanover was down 1 3/4 at 38 1/2; Chemical New York fell 1 3/8 to 39 5/8, and BankAmerica lost to 11.

The Dow Jones industrial average was down more than 20 in the early going. Technical analysts said traders appeared to step up their buying when the average approached 2,200, which some regard as a “support level” for the market.

Declining issues outnumbered advances by more than five to two in the overall tally on the Big Board. Large blocks of 10,000 or more shares traded on the NYSE totaled 4,014, compared to Tuesday’s 3,514.

In the credit markets, bond prices posted modest gains in quiet trading in reaction to a more stable dollar and lower commodity prices and following the previous session’s selloff.

The Treasury’s bellwether 30-year bond, which lost 1 7/8, or $18.75 per $1,000 face amount, on Tuesday, ended the day up $2.50. Its yield fell slightly to 9.05% from 9.07%.

Rebound From Overselling

Bondholders also worry that a weaker dollar would make bonds and notes denominated by the U.S. currency less attractive to foreign investors.

“I think there’s further evidence that the inflation spike of the last couple of weeks is less a reflection of fundamental economics than commodity speculation,” said Marshall B. Front, an economist at the Chicago investment and mutual-fund management firm of Stein Roe & Farnham.

“That recognition, plus the relative stability of the dollar have taken some pressure off the bond market,” he said.

Maria Ramirez, an analyst for the investment firm Drexel Burnham Lambert, said Wednesday’s bond market improvement also reflected “basically a bounce-back from an oversold condition.”

In other developments, yields on two-year Treasury notes rose in Wednesday’s auction to an average 8.05%, up from 7.20% at the last auction on April 22.

It was the highest rate since two-year notes averaged 8.17% on Jan. 22, 1986.

The federal funds rate, the interest on overnight loans between banks, traded at 6.75%, up from 6.375% Tuesday.