Profit Taking Sends Dow Down 6

Stock prices fell Tuesday in light trading, weighed down by profit taking and comments by Federal Reserve Board Chairman Alan Greenspan that appeared to reduce chances of an imminent cut in interest rates.

The Dow Jones index of 30 industrials, falling for the first time this month, declined 6.08 points to 2,785.33.

Greenspan, responding to pressure from the Bush Administration to cut interest rates and bring the dollar down, said in a speech in Moscow that such short-term policy goals were misguided and that the Fed’s central aim was to fight inflation.

His comments suggest that the Fed is in no hurry to reduce interest rates.

Higher interest rates slow the economy, hurting most businesses, and also make fixed-income investments such as bonds more attractive in relation to stocks.

Led by blue chip issues, Wall Street had advanced to record highs recently. Many market strategists have expected the Dow index to show some resistance as it approaches the 2,800 mark, which it has never surpassed.

“We’ve had five straight up days,” said Tom Callahan, a Yamaichi International executive vice president. “We should have a little bit of a correction.”

Profit takers came in almost immediately after the opening, and mild computer-driven program selling in late afternoon helped deepen the decline.

Declining issues outnumbered advancing ones by about 4 to 3 in nationwide trading of stocks listed on the New York Stock Exchange, with 831 down, 652 up and 493 unchanged.

Volume on the floor of the Big Board totaled 147.56 million shares, up from 130.72 million in Monday’s session, which had been the lowest level in more than two months. Monday marked the Columbus Day and Yom Kippur holidays.

Among actively traded issues on the NYSE, American Airlines’ parent AMR tumbled 3 3/8 to 101 3/8, apparently reflecting investor skepticism about a $120-a-share offer made last week by New York developer Donald J. Trump.

Nationwide, consolidated volume in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 176.78 million shares.

Share prices fell sharply on London’s stock exchange as an early rally effort faltered on worries about the British economy. The Financial Times 100-share index, London’s most closely watched market barometer, fell 28.2 points to close at 2,218.8.

Japanese financial markets were closed Tuesday for Sports Day, a national holiday.

Credit

In the credit markets, bond prices fell as traders cashed in some gains made in last week’s strong rally.

Trading was light as the U.S. credit markets reopened after Monday’s Columbus Day holiday.

The price of the Treasury’s benchmark 30-year bond fell 5/32 point, or $1.56 for every $1,000 in face amount, from late Friday. Its yield was unchanged at 8.01% from late Friday.

The U.S. market for Treasury bills, notes and bonds was closed Monday, as were many banks. In Europe, prices of Treasury issues were slightly higher on Monday.

In corporate trading, industrials inched higher. Moody’s investment grade corporate bond index, which measures total return on a portfolio of 80 corporate bonds with maturities of five years or longer, was up 0.34 to 333.92, from Monday. The corporate bond market was open for trading on Columbus Day.

The federal funds rate, the interest on overnight loans between banks, was quoted at 8.875%, up from 8.813% late Friday.

Currency

The Greenspan comments in Moscow pushed the dollar sharply higher.

Gold prices slipped here and abroad.

On the Commodity Exchange in New York, gold bullion for current delivery closed at $361 an ounce, down $2.10 from Monday. Republic National Bank of New York quoted a late bid for gold also at $361, off $1.50.

Currency dealers attributed the dollar’s rally mainly to Greenspan’s remarks.

Greenspan said “attempts to maintain unrealistic exchange rates may lead to destabilizing international capital flows, and ultimately have to be abandoned.” He said paying inordinate attention to intermediate targets in setting monetary policy “may not promote the attainment of long-term goals.”

The British pound, meanwhile, continued its sharp drop Tuesday despite last week’s hike in Britain’s interest rates. One dealer said there is a lack of confidence in sterling.

In London, it cost $1.5580 to buy one pound, cheaper than $1.5775 late Monday. Sterling fetched $1.5520 in New York, down from $1.5775 on Monday.

Tokyo markets were closed Tuesday for a national holiday. But in London, the dollar was quoted at 143.25 Japanese yen, down 1.02 yen from Monday. The dollar stood at 144.50 yen in New York, up from 142.85 yen Monday.

Commodities

Copper futures prices staged a dramatic turnaround, rising to new contract highs early in the session before plunging on reports that a 3-month-old strike at a Canadian copper mine was nearly settled.

“It was a very violent day,” said James Steel, a metals analyst with the futures brokerage Refco Inc. in New York.

On other commodity markets, soybeans sank to 23-month lows while grain futures were mixed; energy futures rose strongly; precious metals retreated, and livestock and meat futures were mixed.

Copper futures settled 2.6 to 3.6 cents lower, with the contract for delivery in December at $1.2805 a pound, 5.65 cents off its high for the day of $1.337.

The market opened with strong gains, continuing the upward course that copper prices had taken since midyear, when strikes and other production problems at major mines around the world began threatening supplies.

But in the afternoon, reports surfaced of significant progress in a strike at Highland Valley Copper’s mine near Logan Lake, B. C., where workers walked off the job July 6 in a contract dispute.

Soybean futures sank to 23-month lows on the Chicago Board of Trade as a harvest-related sell-off stretched into its fourth straight day.

The corn and soybean harvest is advancing rapidly under near-perfect conditions and analysts said the higher-than-expected yields are exaggerating the normal seasonal drop in prices.

Soybean futures settled 4.50 to 6.75 cents lower, with the contract for delivery in November at $5.525 a bushel, the lowest settlement for a near-month soybean contract since Nov. 11, 1987.