Profit Taking Thwarts Rally; Dow Slips 11.93

Stock prices finished mostly lower Tuesday as profit taking and a sharp rise in crude oil prices derailed the market’s year-end advance.

Trading was more active than in Monday’s session.

“It looks like a normal pullback after the recent rally,” said Alfred E. Goldman of the brokerage A. G. Edwards & Sons Inc. in St. Louis.

The Dow Jones index of 30 industrial issues, which rose 15.08 on Monday, slipped 11.93 to close at 1,978.45. The widely watched market indicator was off as much as 28 points at midday and rallied in the final 30 minutes of trading.

Declining issues led gainers by a margin of 3 to 2 among stocks on the New York Stock Exchange, with 658 up, 935 down and 402 unchanged.

The NYSE’s composite index, however, managed to post a tiny gain of 0.05 to close at 139.54.

Big Board volume totaled 192.65 million shares, compared to 161.69 million shares Monday.

Falling oil prices and a satisfactory economic performance since the mid-October stock crash have fueled a powerful stock rally that had lifted the Dow Jones average by 223 points between Dec. 4 and Monday’s close.

But prices of crude oil futures jumped Tuesday, pushing the key West Texas Intermediate grade up $1.21 a barrel to $16.61.

That development hurt bond prices and pushed some long-term interest rates higher, making bonds more attractive than stocks to some investors.

While analysts said the action in the oil and bond markets contributed to stocks’ retreat, they said a decline was expected because of the pace of the market’s recent advance.

“The market has gotten a bit overextended on the upside in the past two weeks,” said Michael Metz, vice president and technical analyst for Oppenheimer & Co. “We are seeing a little profit taking.”

Rather than setting off alarms, Edwards’ Goldman said the pullback “improves the health of the rally by taking a little froth out of it.”

He said he expects that stock prices will continue to rally for the rest of the year but added, “This Christmas cheer will be followed by a hangover not long into the new year.”

In economic news, the government reported that orders to U.S. factories for durable goods were virtually unchanged in November after a 1.6% October advance and a 2.5% September gain.

Early Tuesday, Congress completed passage of a deficit-reduction package that was crafted in the wake of the market crash.

Southern California Edison was the NYSE’s most actively traded issue, finishing unchanged at 30 5/8 as several huge blocks were traded.

Second most active was another utility issue, Carolina Power & Light Co., which fell 5/8 to 32 3/8.

Among the blue chip issues, General Electric rose 1 to 47; General Motors fell 1 1/2 to 61 7/8, and International Business Machines was unchanged at 118.

Pfizer rose 3 to 49 3/4 on takeover speculation.

Pillsbury jumped 3 to 34 1/2. The Wall Street Journal ran a story that speculated that a “shake-up is likely soon” at Pillsbury that could include the sale of its Burger King restaurant business. But the company said “both the tone and content of the article are wrong and irresponsible.”

Eli Lilly rose 2 to 78 1/2. It completed the previously announced $700-million sale of its Elizabeth Arden Inc. cosmetics subsidiary and announced a plan to repurchase up to $1 billion worth of Lilly common stock.

The Wilshire index of 5,000 equities closed at 2,434.096, up 1.351 or 0.06% from Monday.

Large blocks of 10,000 or more shares traded on the NYSE totaled 3,050, compared to 4,280 Monday. Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 225.27 million shares.

Standard & Poor’s index of 400 industrials rose 0.81 to 289.04, and S&P;’s 500-stock composite index rose 0.41 to 249.95.

The American Stock Exchange index rose 0.22 to 256.97. The NASDAQ composite index closed at 327.30, down 1.37.