Investors Rest After Rally; Dow Drops 0.50

Stock prices finished barely changed Thursday, clipping the wings of a strong two-day rally as investors braced for today’s release of the nation’s trade report for December.

Blue chip issues bogged down after a strong advance Wednesday, while smaller stocks managed some modest gains.

The Dow Jones index of 30 industrials, up 47.58 on Wednesday, slipped back 0.50 to 1,961.54.

Advancing issues outnumbered declines by about 8 to 7 on the New York Stock Exchange, with Big Board volume totaling 200.76 million shares, compared to Wednesday’s 187.98 million.

Harry Miller, portfolio analyst at Johnson, Lane, Space Smith & Co. in Atlanta, called Thursday “a resting day” after a strong rally that began on Tuesday.

“Considering the consolidation in the bond market and a certain amount of nervousness before the trade number, stocks put in a pretty nice performance,” said Rodd Anderson, vice president in equity trading at Shearson Lehman Hutton.

Traders attributed a round of late-afternoon selling to nervousness about holding stocks before today’s trade report.

But they said other investors saw the lower prices as an opportunity to buy stocks and as a result, the cheaper prices were short-lived.

Specifically, the market was confused by Thursday’s stronger-than-expected January retail sales figures. While consumers have apparently not been frightened away from stores by the October stock crash, their active buying also means that interest rates may not have to be lowered to rev up the economy.

But at least, analysts said, the market’s steadiness in the face of the rising money market interest rates was positive. Declining interest rates, reinforced by hope that the Federal Reserve might soon cut its influential discount rate, have been the driving force behind recent stock market gains.

But the 0.5% rise in January retail sales and another government report showing a slight drop in applications for unemployment insurance helped push bond prices down and their corresponding yields up.

In the stock market, Federated Department Stores gained 2 3/8 to 59 7/8. Campeau Corp. of Toronto said Wednesday that it had lined up $660 million in financing from Edward DeBartolo and the Reichmann family for its offer to acquire Federated.

Jewelcor led the day’s percentage gainers, jumping 3 3/8 to 15 5/8. A group including top Jewelcor executives and Bear Stearns Cos. proposed a bid to acquire the company for a price in the range of $15 to $16 per share.

Gillette gained 3 5/8 to 41. An investment group said late in the day that it had acquired a stake of about 6% in the company.

Stop & Shop Cos., target of a takeover bid by Dart Group, rose 1/2 to 36 7/8.

Niagara Mohawk Power led the active list, down 1/8 at 13 5/8 on volume that accounted for more than 10% of the day’s total activity. Analysts said most of the trading in the stock involved strategies keyed to the company’s impending dividend.

In London, stock prices rose Thursday in a session marked by continued lack of institutional participation. The Financial Times 100-share index rose 11.3 points, to close at 1,729.8.

The Tokyo Stock Exchange was closed for a holiday.