FINANCIAL MARKETS : Dow Average Off 1.9 Despite Rally Early in Day

Wall Street’s Dow industrials finished lower again Tuesday after investors reversed an early rally that briefly carried the blue chips above the 2,600 level.

The Dow Jones average of 30 industrials closed with a minor loss of 1.90 at 2,583.08 after sporting a gain of more than 18 points at noon.

In the broader market, advancing issues outpaced declines by about 9 to 8 in nationwide trading of New York Stock Exchange-listed stocks, with 772 up, 684 down and 529 unchanged.

Big Board volume rose to 179.27 million shares from 136.26 million Monday.

Stock prices displayed strength early as bargain hunters found attractive buys after Monday’s selloff, in which the Dow industrial average fell 22.3.

But, in the afternoon, the market ran into profit taking as the Dow approached the 2,600 level.

Jack Barbanel, a senior vice president with Gruntal & Co., said the market is suffering from recurring recession worries.

“One has to get a little bit concerned that the slowdown is coming much too fast,” said Barbanel. He said instead of heading for a so-called soft landing, the economy “may have a little bit of a bumpier landing than expected.”

A government report on durable goods added to a string of statistics pointing to weak economic activity. Orders for durable goods rose a seasonally adjusted 0.3% in June after falling 4.4% in May, the Commerce Department reported.

Traders dumped technology stocks as word of a bearish outlook for the personal computer market circulated in the market. International Business Machines fell 3/4 to 112 3/4, Compaq Computer slid 2 to 88 1/8, Hewlett Packard fell 1 1/8 to 51 1/2, Digital Equipment dropped 1 7/8 to 92 3/4 and Data General, which reported a loss for its fiscal year ended June 24, lost 1/2 to 17 3/4.

Unisys, which fell 1 3/8 to 20 1/4, led the Big Board’s list of actively traded issues. On Monday it posted second-quarter earnings that were sharply lower than those of the 1988.

Shares of UAL Corp., parent of United Airlines, closed at 183 1/2, up 6 3/4, fueled by a report that Los Angeles billionaire Marvin Davis had acquired a stake in the Chicago-based airline. Dan Dorfman reported in Tuesday’s editions of USA Today that Davis, the former owner of 20th Century Fox, had acquired 3.5% of UAL. A spokesman for Davis declined comment on the report. Davis recently lost a bidding war for NWA Inc., the parent of Northwest Airlines, but not without making a $50-million profit on his NWA shares.

Credit

Short-term interest rates slid and bond prices advanced on speculation that the Federal Reserve had decided to encourage lower interest rates.

The Treasury’s benchmark 30-year bond rose 7/32 point, or about $2 per $1,000 face amount, while its yield fell to 8.11% from 8.13% late Monday.

Yields on some short-term Treasury issues fell by more than one-10th of a percentage point as some traders detected what they felt was evidence that the Fed had relaxed its credit policy slightly.

William Sullivan Jr., economist for Dean Witter Reynolds Inc., said some traders reached that conclusion after the Fed failed to drain reserves from the monetary system by arranging short-term sales of securities to dealers at midday when the federal funds rate was trading below 9 1/4%.

The federal funds rate is the interest that banks charge each other for short-term loans, and Sullivan said the Fed had been taking steps recently to keep it in the 9.25% to 9.375% range.

The federal funds rates settled late in the day at 9.063%, down from 9.125% late Monday.

Commodities

Prices of cotton futures rose sharply, reaching a 22-month high on the New York Cotton Exchange amid continuing concerns about the size and quality of the U.S. cotton crop.

On other markets, soybean futures fell for the fourth straight day, energy futures were lower, livestock and meat were mostly lower and precious metals were narrowly mixed.

Cotton settled 0.15 cent lower to 1.33 cents higher with the October contract at 74.40 cents a pound, the highest settlement for a near-month contract since Sept. 25, 1987.

Heavy rains in spring and early summer delayed cotton planting in the Mississippi Delta region and the Texas high plains, reducing planted acreage to 10.5 million acres from 12.5 million in 1988. Despite improvement in the weather since then, expectations for an extremely small cotton crop persist.

Those fears were reinforced by the U.S. Department of Agriculture’s July 12 crop report, in which the government lowered its estimate for cotton stocks on July 31, 1990, the end of the 1989-90 marketing year, to 4.5 million bales from the previous month’s estimate of 6.5 million bales.

Prices of soybean futures fell for the fourth straight day on the Chicago Board of Trade on bearish weather forecasts and a government report showing improved crop conditions.

Currency

The dollar fell as traders picked out indications that the Fed was lowering interest rates, which would make dollar investments less attractive to global investors.

Gold prices were mixed.

“Everybody’s looking for secret clues as to when the Fed is going to ease,” said Michael Malpede, senior currency analyst at Refco Group in Chicago The dollar held up after reports on housing sales and orders for durable goods because the reports were roughly consistent with expectations.

But the dollar lost ground when the Fed failed to drain reserves from the banking system in the afternoon, as would be necessary to prop up the federal funds rate at the going level, Malpede said.

The federal funds rate influences a wide variety of other interest rates throughout the economy.

Meanwhile, the Japanese yen snapped back from the slump that followed Sunday’s election loss by the Japanese Liberal Democratic Party and the announcement by Prime Minister Sosuke Uno that he would resign.

In Tokyo, the dollar rose 0.40 Japanese yen to a closing 142.35 yen. Later in London, it was unchanged at 142.45 yen. In New York, the dollar fell to 141.55 yen from 142.55 yen on Monday.

In London, the British pound rose to $1.6255 from $1.6185 late Monday. Later in New York the pound rose to $1.6385 from $1.6260.

Tables begin on Page 6

MARKETS AT A GLANCE Tuesday July 25, 1989 DOW 30: -1.90 2,583,08 NYSE: +0.07 186.10 AMEX: +0.30 370.12 NASDAQ: +0.49 446.47 WILSHIRE: +2.517 3,273.238 S&P; 500: +0.21 333.88