Rally Slips Away; Dow Gains 4.83 : Late Program Selling Eats Into Early Boost From Bonds, Dollar

From Times Wire Services

Wall Street stocks danced above the 2,300 mark again Wednesday, but then closed with only small gains after late program selling erased most of a rally inspired by strength in bonds and the dollar.

The Dow Jones index of 30 industrials, up about 18 points at its afternoon peak, closed with a 4.83 gain at 2,295.54.

Advancing issues outnumbered declines by about 5 to 4 in nationwide trading of New York Stock Exchange-listed stocks.

Volume on the floor of the Big Board came to 167.62 million shares, down from 172.50 million in the previous session.


Analysts said investors were growing more optimistic awaiting the employment report for February from the Labor Department on Friday.

Wall Street analysts hope the data will show a slowing of economic growth, providing a favorable portent for the inflation outlook and a possible easing of upward pressure on interest rates.

That theme also seemed to catch on in the foreign exchange market, where the dollar rose, and in the credit markets, where interest rates declined a bit.

With all that, however, the late pullback meant that, for the second straight session, the Dow Jones industrial average turned back after it crossed the 2,300 level.


Time Inc. dropped 1 7/8 to 114 7/8 after jumping 9 1/4 points Tuesday. The big gain was attributed to speculation that the company, in reaching its weekend agreement to merge with Warner Communications, might have opened itself up to a takeover bid. Some analysts were skeptical that would happen.

Gainers among the blue chips included Philip Morris, up 2 1/8 at 113 3/4; Du Pont, up 1/4 at 99 3/4; Procter & Gamble, up 3/8 at 88 3/4, and General Electric, up 1/4 at 45 3/8.

However, International Business Machines slipped 1/4 to 119 5/8 and American Telephone & Telegraph was down 3/8 at 30 1/2.

Texas Air, the most active American Stock Exchange issue, climbed 5/8 to 13 1/8. The machinists’ union, which has been striking the company’s Eastern Airlines subsidiary since last Saturday, said it wanted to revive talks with Carl C. Icahn, chairman of Trans World Airlines, about a possible deal to take over Eastern.

Japanese share prices retreated from early highs to end lower Wednesday, as further developments in the Recruit share scandal depressed the market. The 225-share Nikkei index closed down 100.28 points at 31,837.66.

British stocks snapped a six-session winning run. The Financial Times 100-share index eased from a morning rally to close 0.2 point lower at 2,083.3.


The dollar strengthened against all major currencies in moderate trading as some traders concluded that the Bush Administration was showing flexibility on a tax increase to reduce the budget deficit.


Gold prices declined after rising overseas. Republic National Bank of New York quoted a bid of $391.90 an ounce of gold around 4 p.m. EST, down $1 from Tuesday’s late bid.

Currency dealers attributed the dollar’s rally Wednesday to a report quoting Michael Boskin, chairman of President Bush’s Council of Economic Advisers, as saying the Administration “has not ruled out a discussion” of taxes as part of a formal budget negotiation.

Boskin also said the Administration has not abandoned its opposition to higher taxes.

Nevertheless, the market chose to interpret Boskin’s testimony as good news for the dollar. Robert Ryan, senior currency trader for Irving Trust Co., said, “Bush is now conceding that he may allow higher taxes.”

Dealers said there were reports of the Federal Reserve selling small amounts of dollars to stem its rise Wednesday but that most market participants saw that intervention as more symbolic.

In Tokyo, where trading ends before Europe’s business day begins, the dollar fell 0.30 Japanese yen to a closing 128.73 yen. It also was quoted at 128.73 yen in London, and later, in New York, it rose to 129.225 yen from 128.825 yen Tuesday.

The dollar gained against the British pound in London, where it cost $1.7200 to buy one pound, cheaper than $1.7220 late Tuesday. Sterling fetched $1.7155 in New York, down from $1.72155.



Soybean futures prices fell as much as 10.75 cents a bushel, erasing much of the past week’s gains as speculators unnerved by the looming Brazilian harvest and an increase in farmer selling backed away from the market.

On other markets, energy futures posted strong gains on signs of renewed tensions between Iran and Iraq; precious metals retreated; copper futures fell, and livestock and meat futures finished mostly lower.

Grain futures followed soybeans lower on the Chicago Board of Trade. Wheat settled 1.75 cents to 4 cents lower, with March at $4.30 a bushel; corn was 0.75 cent to 2.75 cents lower, with March at $2.755 a bushel; oats were 2.50 cents to 5 cents lower, with March at $2.05 a bushel, and soybeans were 5 cents to 10.75 cents lower, with March at $7.555 a bushel.

Soybean growers in Brazil, the world’s second-largest producer after the United States, are preparing to harvest their largest crop ever.

The movement of Brazilian--and then Argentine--soybeans into the global pipeline will help ease the supply tightness that has contributed to the market’s firm tone.

Oil futures rallied on the New York Mercantile Exchange following a report that Iran’s United Nations ambassador had accused Iraqi soldiers of killing five Iranian soldiers on Feb. 17.

The incident would mark the bloodiest clash between the Middle Eastern nations since the beginning of their 7-month cease-fire.

The energy market’s rally also was seen as partly a reaction to Tuesday’s weekly American Petroleum Institute report, which showed declines in U.S. stocks of gasoline and distillates, although crude-oil supplies increased.

Gold and silver futures retreated on New York’s Commodity Exchange, selling off late in the session after gold for April delivery encountered resistance at $398.80 an ounce.

Gold settled 30 cents to 60 cents lower, with April at $395.40 an ounce; silver was 1.2 cents to 1.8 cents lower, with May at $5.947 an ounce.


Bond prices posted moderate gains in quiet trading as many investors sat out the session also awaiting Friday’s release of unemployment figures.

The Treasury’s benchmark 30-year bond rose 3/8 point, or $3.75 per $1,000 face amount, while its yield, which moves in the opposite direction from its price, slipped to 9.05% from 9.09% late Tuesday.

Mitchell Held, chief financial economist with Smith Barney, Harris Upham & Co., said a stronger dollar helped support bond prices. However, he said the gains had little significance because most investors were treading lightly in advance of the government’s February unemployment report.

Traders also were awaiting trade deficit and wholesale price reports scheduled for release next week, Held said.

In the secondary market for Treasury bonds, prices of short-term governments ranged 1/32 to 1/16 point higher, intermediate maturities rose 1/8 point and long-term issues picked up 11/32 point, according to Telerate Inc., a financial information service.

The federal funds rate, the interest on overnight loans between banks, was quoted at 10.5%, up from 8.75% late Tuesday.

Tables begin on Page 9