Tax Factors Prompt Stock Selloff : Slumping Bond Market Continues Its Pressure on Dow

NEW YORK â€”  Stock prices slipped broadly lower Tuesday, pressured by the sagging bond market and continued selling for tax purposes, analysts said.

The Dow Jones average of 30 industrial stocks closed at 1,908.61, down 3.51.

At the New York Stock Exchange, losers outpaced gainers by about 12 to five, with 1,129 issues lower, 473 higher and 467 unchanged. Volume on the New York Stock Exchange stood at 126.18 million shares, up from Monday’s 99.80 million.

“The bond market was weak, and that undoubtedly had some effect on it. But things are usually dull this time of year anyway,� said Alan C. Poole, an analyst at the Laidlaw, Adams & Peck securities firm.

On Monday, bonds had moved sharply lower amid concern over the falling dollar, fears of inflation--partly because of higher oil prices--and diminishing prospects for interest rate cuts.

This spilled over into the stock market, contributing to an 18.25-point loss in Monday’s Dow index.

BellSouth Corp. led the Big Board’s most-active list at 58 1/8, down 7/8. It begins trading ex-dividend Monday.

Illinois Power was unchanged at 29 3/8, Southern California Edison was up 1/8 at 34 1/8 and Niagara Mohawk Power was down 2 at 16, after reporting a valve leak at one of its nuclear power plant units.

IBM was up at 120 7/8, while Goodyear was down 1/8 at 41 1/2. AT&T; was down at 25, Bank of Boston was down 1/2 at 41 1/8 and Coca-Cola was up 3/8 at 38 3/8. ITT was up 1 at 54 on word that it had joined a French state-owned company in forming the world’s second-largest telecommunications company.

5-Point Increase

The federal funds rate, which is the interest banks charge each other for short-term loans, closed at 14%, up from 9% late Monday.

The Treasury’s 30-year bond issue was off 1/8 point, or about $1.25 per $1,000 face amount, as its yield rose to 7.45% from 7.43% late Monday.

Prices for corporate and municipal bonds also fell.

Meanwhile, the Treasury Department sold $7.3 billion in seven-year Treasury notes at the lowest yields in a decade for such an auction.

The average yield was 7.09%, down from 7.21% at the last auction on Oct. 28, the Treasury said. It was the lowest rate since the yield on newly issued seven-year notes averaged 7.03% on Nov. 4, 1976.

In the secondary market for Treasury bonds, prices of short-term governments fell 1/16 point, intermediate maturities were off 1/8 point and 20-year issues were down point, according to the investment firm Salomon Bros.

In corporate trading, industrials were down 1/8 point and utilities fell 3/8 point in light trading, according to Salomon Bros.

Among tax-exempt municipal bonds, general obligations fell 3/8 point and revenue bonds were down point, Salomon Bros. said. Trading was light.

Yields on three-month Treasury bills were up 3 basis points at 5.69%. Six-month bills rose 2 basis points to 5.68% and one-year bills were up 6 basis points at 5.72%.