Stock Prices Head Lower--With Takeover Issues the Notable Exceptions

Wall Street stocks pulled back from record highs in thin trading Tuesday, but their decline was checked by a surge in the dollar and a fresh rally in transport stocks. The Dow Jones index of 30 industrial stocks fell 7.41 to 2,744.68, still the second-highest close ever behind the record high of 2,752.09 set Friday. The market was closed Monday in observance of Labor Day.

“Any time you get into totally uncharted waters, people get nervous. That’s why the market is starting to consolidate prices,” said David Holt, director of technical research at Wedbush Morgan Securities.

“There’s nothing to take the market higher,” he said, referring to Tuesday’s quiet session. “It’s a day where there’s no leader.”

In the broader market, declining issues outnumbered advancing ones by about 4 to 3 in nationwide trading of New York Stock Exchange-listed stocks.

Big Board volume was 145.18 million shares, up from 130.30 million in Friday’s session.

Shares in the broader market were helped by a rally in the dollar against other currencies, despite heavy dollar selling by the Federal Reserve and 12 other central banks.

Analysts said there was little activity as many traders had not yet returned from the long Labor Day weekend. Some program trading and a selloff to gain profits sent stocks lower after an up-and-down morning session, traders said.

Takeover-related buying in the airline and hotel sectors attracted the most interest, sending prices up. The Dow transportation index climbed 5.69 to 1,532.01, another new high.

“Takeover names and transportation continue to be the only things that get any play,” said Thomas R. Walsh, head of equity trading for Nikko Securities Co. International.

UAL, parent of United Airlines, rose 3 3/4 to 290 3/4 amid speculation that investor Marvin Davis would top a management-led buyout offer of $300 a share. Other potential takeover targets in the industry also moved higher. AMR, parent of American Airlines, gained 1/2 to 90 1/4, and Delta rose 1 3/8 to 81 3/8.

Among hotel stocks, Holiday Corp., owner of Holiday Inn, gained 1 3/8 to 81 3/8 in reaction to rumors the company turned down a takeover offer valued at $105 a share. Hilton Hotels, which recently put itself up for sale, gained 2 5/8 to 108 3/4.

Oil stocks were mostly higher. Mobil was up 1/2 to 55 5/8, Chevron increased 7/8 to 57 7/8, Arco gained 5/8 to 105 1/4. Amoco fell 1/8 to 48 1/4, and Exxon was down 1/8 to 43 7/8.

Philip Morris was a leading issue among blue chips, rising 2 3/8 to 166 7/8. Other active stocks included Bristol-Myers, up 3/4 to 50 7/8; IBM, up 3/8 to 117 3/4; General Motors, unchanged at 50, and Chrysler, unchanged at 27.

Losers on the day included Teledyne, down 3 3/4 to 372; Coca Cola, down 1 3/8 to 65 5/8, and three technology companies--Hewlett-Packard, which fell 1 3/8 to 51 3/4; Honeywell, down 1 1/4 to 87 3/4, and Cray Research, off 1 1/8 to 43.

Ford, which is holding talks with the Swedish auto maker and aerospace company Saab-Scania, lost 5/8 at 53 5/8.

Tokyo stocks seesawed through the day before closing mostly lower in light trading. The key 225-share Nikkei index slipped 41.83 to end at 34,441.95.

A late rally on the London Stock Exchange propelled stock prices to another post-crash high. The Financial Times 100-share index ended at 2,426.0, a rise of 6.8 points. The previous post-crash high was Monday’s close at 2,419.2.

Credit

Bond prices edged lower in quiet trading after the Labor Day holiday weekend.

The Treasury’s benchmark 30-year bond declined 3/32 point, or about $1 for each $1,000 in face amount. Its yield rose to 8.13% from 8.12% late Friday.

The dullness in the market contrasted with Friday, when bond prices rose strongly in response to indications of manufacturing weakness in a monthly survey of the nation’s purchasing managers. The long bond rose $7.50 per $1,000 face value on Friday.

In the secondary market for Treasury securities, prices of short-term government issues shed 1/32 point to 1/16 point, intermediate maturities were off by 1/16 point, and longer-term issues lost 7/32 point to 9/32 point, according to Telerate Inc., a financial information service.

The movement of a point is equivalent to a change of $10 in the price of a bond with a $1,000 face value.

The Shearson Lehman Hutton daily Treasury bond index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, fell 1.22 to 1,176.66.

The federal funds rate, the interest on overnight loans between banks, was quoted at 8.938%, the same as late Friday.

Commodities

Cocoa futures prices tumbled to life-of-contract lows on New York’s Coffee, Sugar & Cocoa Exchange following a selloff Monday on the London market that analysts attributed to signs that supplies will remain abundant.

On other markets, coffee and cattle futures fell sharply; energy and wheat futures advanced, and precious metals retreated.

Cocoa futures settled $75 to $78 lower, with the contract for delivery in September at $1,045 a ton.

Coffee futures fell amid profit taking in New York after posting strong gains last week.

Green, unroasted coffee settled 2.7 cents to 5 cents lower, with September at 84.30 cents a pound.

Live cattle futures plummeted on signs that an expected drop in cattle marketings was not materializing.

Live cattle settled 0.13 cent to 1.25 cents lower, with October at 72.25 cents a pound; feeder cattle were 0.25 cent to 0.50 cent lower, with October at 81.12 cents a pound; live hogs were 0.02 cent to 0.88 cent lower, with October at 39.27 cents a pound, and frozen pork bellies were 0.45 cent to 1.05 cents lower, with February at 43.37 cents a pound.

Energy futures prices rose on the New York Mercantile Exchange, paced by an advance in wholesale home heating oil and gasoline due to stronger worldwide demand and expectations for a temporary drop in supply.

West Texas Intermediate crude oil settled 13 cents to 20 cents higher, with October at $19.05 a barrel; heating oil was 0.53 cent to 0.60 cent higher, with October at 54.57 cents a gallon, and unleaded gasoline was 0.45 cent to 0.68 cent higher, with October at 53.76 cents a gallon.

Wheat futures posted solid gains on the Chicago Board of Trade in reaction to improved foreign demand for U.S. wheat, while corn and soybean futures prices retreated in lackluster trading.

Wheat settled 0.75 cent lower to 5.75 cents higher, with September at $3.9725 a bushel; corn was 0.50 cent to 1.75 cents lower, with September at $2.3225 a bushel; oats were 2.25 cents lower to 1 cent higher, with September at $1.3475 a bushel, and soybeans were 7 cents lower to 0.75 cent higher, with September at $5.8125 a bushel.

Gold and silver futures retreated slightly in quiet trading on New York’s Commodity Exchange.

Gold settled $1 lower across the board, with October at $361.40 an ounce; silver was 1.3 cents to 1.5 cents lower, with September at $5.063 an ounce.