Stocks Decline as Investors Cash In on Recent Advances; Dow Dips 3.91

The stock market retreated slightly Thursday in moderate trading, weakened by investors cashing profits from the strong gains of the previous two sessions.

The Dow Jones industrial index retreated to close 3.91 lower at 2,148.29, after hitting the highest level since October in Wednesday’s 43-point rise and Tuesday’s 25-point rally. Broader indexes were largely lower.

Some traders were disheartened by what they called the market’s failure to sustain the momentum of a rally that began two days earlier. They said it reflected a reluctance by a broad range of investors to commit significant money to the market for a prolonged period.

“When a market or a stock breaks out and it’s in good shape, what you normally do is at for least several days put some legs under it,” said Paul Campbell, a vice president and market technician at Nikko Securities Co. International in New York. “So I would have to argue that at least so far, the fact we’re unable to follow through is a negative, not a positive.”

Others were more optimistic and said the slight retreat should be regarded as a sign of underlying strength.

“The back-to-back days of the magnitude we had are probably some cause for some profit taking,” said John J. Muldowney, head of equity and over-the-counter trading at Scott & Stringfellow Inc. in Richmond, Va. “I’m not at all discouraged by this.”

Eugene Peroni, chief technical analyst for Janney Montgomery Scott, said: “Today was more or less a digestive day for the market.”

Others said they expected large institutional investors and money managers to put cash into stocks over the next several sessions to bolster portfolios before the quarter ends June 30. That development likely would raise prices.

In addition, they said foreigners likely will be increasingly attracted to U.S. stocks if the dollar’s strength is sustained. That would be another positive for the stock market.

Declining issues outnumbered advances by about 8 to 7 in nationwide trading of New York Stock Exchange-listed stocks, with 803 issues down, 708 up and 473 unchanged.

Volume on the NYSE totaled 185.77 million shares, down from 217.51 million in the previous session. More than 21 million shares of the volume Thursday was due to dividend-capture trading strategies in Commonwealth Edison, which rose to 28 5/8.

IBM was the most prominent blue chip issue, surging 2 3/4 to 125 3/4 after having gained nearly 6 in the previous two sessions.

GAF fell 1 3/4 to 46 3/8 after reports emerged that the company was under investigation for possibly manipulating the stock of former takeover target Union Carbide Corp. GAF denied any wrongdoing.

UAL jumped 3 7/8 to 94 5/8 after Merrill Lynch reportedly upgraded its investment rating on the airline company.

Large blocks of 10,000 or more shares traded on the NYSE totaled 3,405, compared to 4,619 on Wednesday.

Nationwide, consolidated volume in NYSE-listed issues, including trading at regional exchanges and on the over-the-counter market, totaled 213.88 million shares.

The Wilshire index of 5,000 equities closed at 2,733.070, down 4.436.

The NYSE index composite index of all listed issues fell 0.32 to 155.03.

Standard & Poor’s index of 400 industrials fell 0.92 to 317.58, and S&P;’s 500-stock composite index fell 0.84 to 274.82.

At the American Stock Exchange, the market-value index rose 0.23 to 308.82. The NASDAQ composite index for the OTC market closed at 391.03, up 0.50.

On the Tokyo Stock Exchange, share prices closed lower Thursday for the fourth straight session due to investor caution regarding the rapid advance of the dollar and the possible reverberations.

The Nikkei index lost 127.85 to 27,732.93. It shed 64.79 points Wednesday.

Share prices on the London Stock Exchange were little changed amid some profit taking and uncertainty over the market’s direction.

The Financial Times-Stock Exchange 100-share index was off 0.4 point at 1,878.9.

Volume was 558.9 million shares, compared to 521.6 million on Wednesday.