FINANCIAL MARKETS : Prices Mixed in Erratic Session; Dow Gains 5.42

The stock market managed a mixed performance Monday, benefiting from an afternoon comeback led by the blue chips.

The Dow Jones index of 30 industrials closed with a gain of 5.42 at 2,518.84 after trading in negative territory for much of the session.

Declining issues narrowly outnumbered advances in nationwide trading of New York Stock Exchange-listed stocks, with 772 down, 714 up and 512 unchanged.

Volume on the floor of the Big Board came to 151.46 million shares, down from 173.24 million in the previous session.

Wall Street market watchers attributed the early setback to sales aimed at collecting profits amassed during the recent advance inspired by takeover speculation. Some of the early selling also was due to trading maneuvers associated with stock index futures.

Michael Metz, an analyst at Oppenheimer & Co., said that when the market suffered its sinking spell early in the day, would-be buyers were standing on the sidelines watching how far share prices would fall.

Before long, these hesitant investors began nibbling again at stocks they considered attractive buys, said Metz.

Analysts say the sentiment seems very positive toward stocks, particularly because the dollar’s surge has started drawing investment money from abroad. Declining interest rates also have steered investors to equities.

Much of the impetus for the rebound in the Dow came from a jump in Procter & Gamble shares to a 52-week high. The stock, driven higher by report of a favorable revision in an analyst’s earnings estimate, closed at 110 5/8, up 5 3/4.

Takeover stocks also figured in the renewed buying. Time gained 4 3/4 to 175 as rumors of a new bid for the communications giant rippled through the market. Paramount Communications, whose $10.7-billion bid for Time has left Time’s planned merger with Warner Communications in limbo, fell 1 7/8 to 57. Warner fell 1 3/8 to 54 3/4.

Burlington Resources topped the list of actively traded issues on the Big Board, with more than 9.2 million shares changing hands. Burlington Resources sported a gain of 1 at 44 7/8; the company confirmed that it has been buying back its shares in recent days.

Among actively traded blue chips, International Business Machines rose 1/2 to 108 7/8, American Telephone & Telegraph was off 1/8 at 36 1/8 and Eastman Kodak lost 5/8, closing at 49 3/4.

Nationwide, consolidated volume in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 178.22 million shares.

The soaring value of the U.S. dollar against the Japanese yen on foreign currency markets sent stock prices sharply lower on the Tokyo Stock Exchange in slow trading. The key Nikkei 225-share index, which lost 78.31 points Friday, plunged 241.97 points to 33,398.01.

Shares also fell in London on news of a faster-than-expected gain in British retail sales in May, which fueled fears that British interest rates may be headed higher. The Financial Times 100-share index fell 3.8 points to 2,138.3.

Commodities

Coffee futures prices plunged after producers and consumers failed to negotiate new export quotas and pricing levels or to extend a current agreement.

On other markets, cotton futures continued to rebound from last week’s losses tied to political unrest in China, and petroleum futures were down amid fears that dissension within the Organization of Petroleum Exporting Countries will mean more oil at cheaper prices.

The world’s leading coffee producers and consumers extended their meeting in London through the weekend in an attempt to reach an agreement to replace one that expires Oct. 1.

The major stumbling block is a request by the largest consumers--notably the United States and Europe--to end a two-tier system allowing exporting countries to sell the commodity to non-members of the International Coffee Organization at prices below what ICO members pay.

“There was pressure from the opening bell and it got stronger as time went on and it became more apparent that no agreement was in the offing,” said Kim Badenhop of Merrill Lynch Capital Markets in New York.

Coffee settled 3.75 cents to 6.23 cents lower on the New York Coffee, Sugar & Cocoa Exchange, with the contract for delivery in July at 124.84 cents.

Contracts for three of the four deferred months closed down the 6-cent daily trading limit; the 6.23-cent loss was for September contracts, which have no limit.

Cotton futures hit the daily limit as well, but on the upside. Cotton settled 1.90 cents to 2 cents higher, with July at 66.95 cents a pound on the New York Cotton Exchange.

“We had some severe weather regarding the crop in the field, but the climb was more a continuation from the support lines we put down last week during the events in China,” said Ed Whitten of Balfour Maclaine Corp. in New York.

Crude oil futures led the products in a downturn at the New York Mercantile Exchange.

OPEC ministers meeting last week in Vienna agreed to raise the cartel’s daily output from 18.5 million barrels per day to 19.5 million, although most analysts say OPEC members already were producing closer to 21 million.

Kuwait’s official quota before the meeting was 1.037 million barrels per day and was increased to 1.093 million. Analysts said Kuwait’s actual production was more than 2 million.

Several of the nation’s leaders were quoted Monday as saying Kuwait will maintain that level--a signal that OPEC will be unable to restrict production levels even to 19.5 million barrels per day for the cartel.

“Then, there’s the question of will they be cheating more with higher quotas, or just the same?” said Peter Beutel of Elders Futures in New York. “Does this mean 21 million or something closer to 22 million?”

Crude oil settled 42 cents to 63 cents lower, with July at $19.26 a barrel; heating oil was 1.58 cents to 1.79 cents lower, with July at 45.45 cents a gallon; unleaded gasoline was 1.85 cents to 2 cents lower, with July at 61.73 cents a gallon.

Grain futures prices were mostly higher, but corn and soybeans were mixed to mostly lower on the Chicago Board of Trade.

Weather, the dominant feature in the market, was behind both trends.

Heavy rain in Texas, Oklahoma and the lower Midwest delayed harvest of the winter wheat crop and helped support prices throughout the day.

But the same storms reached into the corn and soybean belt of the upper Midwest and nourished the still-developing crops in Iowa, Illinois and Indiana.

On the close, wheat was 1 1/2 cents lower to 2.25 cents higher, with the contract for delivery in July at $3.8825 a bushel; corn was 2.25 cents lower to 4 cents higher, with July at $2.495 a bushel; oats were 3.50 cents to 4.50 cents lower, with July at $1.58 a bushel; soybeans were 8.50 cents to 11.75 cents lower, with July at $6.94 a bushel.

Credit

Bond prices finished mixed in mostly quiet trading, with long-term Treasury bonds posting small gains and shorter-term issues declining.

The Treasury’s 30-year bond edged up about 1/8 point, or $1.25 for every $1,000 in face value. Its yield, which moves in the opposite direction from price, slipped from 8.14% late Friday to 8.13%.

The yield was the bond’s lowest since it finished at 8.06% in April, 1987, and was down from 8.29% late Thursday.

Traders said a strong dollar in overseas trading moved long-term bond prices higher.

“The dollar helped,” said Mitchell Held, chief financial economist at Smith Barney, Harris Upham & Co.

Held said bond trading was mostly quiet Monday following some “excitement” overnight in the Japanese market.

The decline in prices of shorter-term bonds was a reaction to signs that the Federal Reserve does not plan to further ease monetary policy, said Kevin Flanagan, a money market economist with Dean Witter Reynolds.

The federal funds rate, the interest banks charge each other for short-term loans, was quoted late in the day at 9.25%, up from 9.125% late Friday.

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