Investors Take a Defensive Posture : Selloff Cuts Into Monday's Advance; Dow Retreats 25.86

From Times Wire Services

Wall Street underwent a round of selling Tuesday that sliced Monday's advance and underscored the confusion that prevails in the market from conflicting signals.

The Dow Jones index of 30 industrial stocks closed at 1,920.59, down 25.86.

Declining issues outpaced advancing issues by about 8 to 5, with 919 issues lower, 573 higher and 449 unchanged among NYSE-listed stocks.

Volume on the Big Board stood at 138.38 million shares, compared to 275.25 million on Monday.

Some investors may have stepped to the sidelines ahead of today's release of U.S. gross national product figures for fourth quarter 1987. The figure, which is the sum of goods and services produced by the economy, will cover the period that includes Oct. 19, or Black Monday.

But conflicting signals about the health of the economy also persuaded investors to take a defensive posture.

Weakness in the bond market also hurt stocks. Analysts noted that an important reason stock prices rose by 67.14 points in the previous two sessions was a bond market rally that sent interest rates so low that many investors found stocks more attractive--and switched.

"The bond market was just weak here, and that's going to be a factor on the stock market," said Thomas Czech, research director at the Blunt Ellis & Loewi securities firm in Milwaukee.

But the rally in bonds suddenly went into reverse Tuesday, after the government announced that durable goods orders jumped 6.7% in December, compared to a 0.1% rise in November.

Analysts said the increase, which reflected a sign of strength in the economy, was much higher than expected. It gave bond traders less reason to hope that the Federal Reserve Board might favor lower interest rates and therefore led to a selloff on the bond market.

As bond prices fell, interest rates rose, putting downward pressure on stocks, they said.

Several also said the stock market was ripe for a decline anyway.

"We had a nice move in the last couple of days, so we're entitled to some kind of pullback," said Rodd Anderson, a trader at Shearson Lehman Bros. "I wouldn't read a real lot into this."

Security Pacific Corp., due to pay its dividend soon, led the Big Board's most active list, unchanged at 30 7/8.

Among takeover-related issues, Federated Department Stores closed up 1 5/8 at 50 5/8. On Monday, Canadian developer Campeau Corp. bid $4.2 billion for the company. Traders apparently expected higher bids to come.

Eastman Kodak was down 1 1/2 at 43 3/8. Last week, Kodak offered $89.50 a share for Sterling Drug--an amount many analysts said was too high.

Sterling closed unchanged at 87 3/4.

Other active issues included Allegis, down 2 at 69 5/8 after a report that it might be reconsidering a promised $50-a-share distribution.

IBM lost 1 1/8 to 111 7/8, while Digital Equipment was down 2 at 122 3/8. Honeywell was up 1 at 58.

Merck dropped 5 1/8, to 148.

Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 159.27 million shares.

The NYSE index fell 1.25 to 140.26.

Standard & Poor's index of 400 industrials fell 3.26 to 285.92, and S&P;'s 500-stock composite index was down 2.60 at 249.57.

At the American Stock Exchange, the market-value index fell 1.28 to 265.77. The NASDAQ composite index closed at 339.22, down 1.29.

The Wilshire 5,000 equity index closed at $2.45 trillion, down $19.795 million.

Large blocks of 10,000 or more shares traded on the NYSE totaled 2,710, compared to 3,413 on Monday.

In London, the Financial Times-Stock Exchange 100-share index rose 5.1 to close at 1,767.3.

In Tokyo, the Nikkei average rose 180.36 to 23,498.76 after climbing 193.07 on Monday.

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