Hope for ‘Santa’ Rally Dims: Dow Slips 16 : Light Trading Accentuates Minor Swings in Year-End Profit Taking

The stock market slipped in thin holiday trading Tuesday, extending Monday’s 56.70-point drop in the Dow Jones index.

Analysts generally agreed that the performance was expectable, given the market’s strong recent advance and the fact that many traders were reluctant to stake out new postions after having closed their books for the year.

The Dow Jones index of 30 industrials lost 16.08 points to close at 1,926.89. The closely watched index had been down about 10 points most of the day.

“The fact is that the market rallied dramatically and surprisingly for three straight weeks and was due for some profit taking,” said Larry Wachtel, market strategist with Prudential-Bache Securities.

From Dec. 7, when the Dow dropped 72.44 points, until late last week the blue-chip indicator gained nearly 240 points. But it gave back about 73 points in the past two sessions.

With just two trading days left in the year, the Dow stood only 31 points above the 1986 close of 1895.95.

Losers outpaced gainers on the New York Stock Exchange-listed issues by about 2 to 1.

Volume on the Big Board came to 111.58 million shares, compared to 137.50 million on Monday.

Monday’s 56-point slide was blamed on weakening by the dollar, higher interest rates on the bond market and light holiday trading, which accentuated the decline.

On Tuesday, the dollar rebounded slightly, giving a lift to bond prices and sending interest rates a bit lower.

Some might have expected this to push stocks higher. But Thomas Czech, research director at the Blunt Ellis & Loewi securities firm in Milwaukee, said he believed that the market’s reaction was “kind of normal,” after Monday’s plunge.

Market-watchers said there was very little buying interest to keep the market afloat.

“There was no participation by institutions,” said Jack Baker, head of block trading for the Shearson Lehman Bros. securities firm. “Anybody who had anything major to do has closed their books.

“And there was no urgency to get out, like yesterday morning,” he added.

Charles Jensen, a technical analyst at MKI Securities Corp., said the market was “due for a little pullback, which is normal,” given its 232.93-point advance over the three weeks that ended Friday.

“Normally, we’d expect the last four days of the year and the first two in January to be up,” he continued. “But despite this aberration, we still have two days left in the year. And this was just a much needed little pause.”

In St. Louis, Alfred E. Goldman, an analyst at the A. G. Edwards & Sons securities firm, disagreed with this theory, however.

Noting that the so-called Santa Claus rally has only failed to materialize seven times in the last 34 years, he said he was concerned that Tuesday’s stronger dollar and higher bond prices failed to spark a rally.

Thus, he said, “I think this points out that the short-term trend is down.”

Money center bank stocks were among the day’s best performers, rising on a Treasury Department announcement of a plan to help Mexico reduce its debt burden.

Among the Big Board’s most active issues, Citicorp was up 1 at 18 3/4, while Chase Manhattan was up 1 1/8 at 21 3/4. J. P. Morgan was up 2 1/8 at 35 1/8

Computervision, subject of a takeover bid by Prime Computer, was up 3/4 at 14. Prime Computer was up 1/2 at 14 7/8. IBM closed at 116, up .

Phillips Petroleum, subject of takeover rumors lately, was up 1/2 at 13. Amoco was up 7/8 at 68 5/8. Pennzoil was down 2 7/8 at 70 3/4, while Texaco was down 1/2 at 37 1/2. A report said Pennzoil expects to net $2.6 billion from its $3 billion settlement from Texaco on their long legal dispute.

Eli Lilly rose 2 1/8 to 78 3/8. The company said it got permission to market Prozac, (fluoxetine hydrochloride) an antidepressant drug.

Salomon Inc., parent of the investment bank Salomon Bros., rose 1 3/8 to 20 3/8. Brokers said one reason for the gain was the announcement of the new compensation package for Chairman John H. Gutfreund, who will not receive a bonus this year.

Salomon laid off 800 people about a week before the Oct. 19 stock market crash, which battered Wall Street’s brokerage industry. Morgan Stanley, another broker, gained 1 7/8 to 48.

Clock Ticking on Offer

Singer’s stock rose in a last minute flurry of speculation over investor Paul Bilzerian’s ability to finance the takeover proposal, said industry analysts and stock speculators.

“We are getting down to the wire and some people are getting nervous and trying to hedge their bets,” an analyst said. Bilzerian’s $50-a-share tender offer expires at 5 p.m. (EST) today. Singer’s shares rose 5/8 to 46 1/2.

The Wilshire index of 5,000 equities closed at 2,389.607, down 10.586 or 0.44% from Monday’s close.

Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 138.79 million shares.

The NYSE index was down 0.66 at 136.84.

Standard & Poor’s index of 400 industrials fell 1.22 to 283.15, and S&P;’s 500-stock composite index was down 0.98 to 244.59.

At the American Stock Exchange, the market-value index fell 1.36 to 255.28. The NASDAQ composite index for the over-the-counter market closed at 325.53, down 0.07.