STOCKS : Traders Take Breather; Dow Declines 27.48

The stock market’s bull rally succumbed to profit taking Tuesday, as investors paused to reassess the sharp rise of the past three weeks.

After gaining nearly 72 points Monday, the Dow Jones industrial average slid 27.48, or just under 1%, to close at 2,874.75.

The decline in the 30-share index Monday was the biggest since Jan. 17.

Optimism about the outcome of the war in the Persian Gulf and the benefit of lower U.S. interest rates have led institutions with piles of cash to edge back into stocks in recent weeks.

As money managers moved off the sidelines, others became afraid that they would miss the rally. The snowball effect has carried the 30-share Dow up nearly 400 points in just over three weeks.

But traders were panting for breath Tuesday. In the broader market, losing issues outnumbered gainers on the New York Stock Exchange, with 860 down, 772 up and 425 unchanged. Big Board volume totaled 256.16 million shares, against Monday’s 265.53 million.

“After yesterday, which was a buying panic, there was a return to reason,” said Thom Brown, managing director at Rutherford, Brown & Catherwood.

“It’s a very healthy correction. This market is in a situation where it went too far, too fast, and it needs consolidation,” he said.

Stocks were pulled down further in the last hour of trading on news that more than 50 oil-field fires are burning in Kuwait, set ablaze either by Iraqi forces or allied bombs.

Aggressive moves by the Federal Reserve, the nation’s central bank, to lower interest rates have also stoked buying. Lower rates typically stimulate the economy, which is mired in recession, and also boost stock and bond prices.

Among the market highlights:

* Boeing, the most active issue on the Big Board, lost 3 1/8 to 48 1/4. The aerospace concern slid for a second session on concerns about airline industry cutbacks and delays of jetliner deliveries, analysts said.

* Airline stocks took a beating, with United Air Lines down 4 1/4 at 135, Delta Air Lines down 3 3/4 at 71 3/4 and American Airline’s parent, AMR Corp., down 1 1/2 at 58 1/2.

* Bucking the downward trend was Silicon Graphics Software, which jumped 3 5/8 to 41 1/4. The stock rose on a published report that Compaq Computer has approached the workstation maker to discuss a possible merger, traders said. Compaq rose 5/8 to 73 1/8.

* U.S. Healthcare rose 3 3/4 to 40 5/8. The company said its fourth-quarter results were well above Wall Street estimates.

In Tokyo, stocks closed sharply higher but off their peaks. The gains were spearheaded by aggressive foreign purchases as energy from overnight Wall Street gains infected Tokyo. The key 225-share Nikkei average jumped 638.93, or 2.63%, to 24,935.01, with 1 billion shares traded.

German trading was dominated by skepticism about the relentless upward surge of U.S. share prices, which Frankfurt dealers said was not justified by fundamental economic data. The 30-share DAX index fell 19.80 to 1,468.94.

Share prices ended lower on London’s Stock Exchange, dragged down by a reversal on Wall Street. The Financial Times 100-share index ended down 14.5 at 2,264.5.

Credit

Bond prices barely budged in lackluster trading.

The price of the Treasury’s bellwether 30-year bond was unchanged, and its yield held at 7.96% from late Monday.

Joel Kazis, head of government trading at Smith Barney, Harris Upham & Co., said trading was light before the release of economic data later this week, starting with January retail sales, which are to be released today by the Commerce Department.

Traders expect the data to be weak, which would give the Federal Reserve further reason to lower interest rates, probably pushing up bond prices.

Economists said the slow trading Tuesday was typical after a government refunding. Last week the Treasury auctioned a record $34.5 billion in government securities, and the market is still digesting the new issues.

The federal funds rate, the interest on overnight loans between banks, slipped to 5.75% from 6.50% late Monday on technical factors.

Currency

The dollar closed higher after major central banks stepped into the European market to prop up the ailing U.S. currency once again.

Major industrial nations have intervened in the currency markets during the past week to support the dollar, worried that a further collapse would hurt the U.S. economy and disturb world trade.

The dollar was also helped by rumors that Japan will cut its discount rate.

The U.S. currency ended at 1.4542 German marks, compared to a close of 1.4477 marks Monday. The dollar also rose to 128.65 Japanese yen, up 1 yen from the previous session.

Other late dollar rates in New York, compared to late Monday’s rates, included: 1.9910 British pounds, down from 1.9985; 1.2460 Swiss francs, up from 1.2370; 4.9565 French francs, up from 4.9360; 1,094.75 Italian lire, up from 1,091.00, and 1.1536 Canadian dollars, down from 1.553.

“Ranges were pretty tight, and it’s liable to stay that way for the next day or two,” said Jeff Link, vice president of Harris Trust & Savings Bank in Chicago.

Eleven central banks bought dollars in European trading, including the Swiss National Bank and the Bundesbank, Germany’s central bank.

Some traders “were surprised by the participation of the Bundesbank and the Swiss,” said Charles Spence, vice president of First Interstate Bank in Los Angeles. “People interpreted that as meaning the intervention effort is still coordinated.”

Bank of Canada also sold Canadian dollars during the day and bought U.S. dollars. The Federal Reserve also joined the dollar-buying binge.

The intervention appears to have arrested the dollar’s decline for now, although dealers said the weak U.S. economy and low interest rates have continued to put pressure on the U.S. currency.

Commodities

Prices of orange juice futures tumbled despite a lower government crop estimate, reflecting perceptions that the threat of frost damage to the Florida orange crop has passed.

On other commodity markets, oil futures were mixed; precious metals advanced; grains and soybeans were mixed, and livestock and meat futures were mixed.

Orange juice futures settled 2.75 to 3.8 cents lower on the New York Cotton Exchange, with the contract for delivery in March down 3.8 cents at $1.1845 a pound.

Heating oil futures ended mostly lower amid profit taking on the New York Mercantile Exchange after Monday’s powerful gains. Other energy futures were mostly higher.

Light sweet crude oil settled 4 cents lower to 46 cents higher, with March at $22.93 a barrel; heating oil was 0.30 cent lower to 0.29 cent higher, with March at 70.80 cents a gallon; unleaded gasoline was 0.89 cent to 1.22 cents higher, with March at 63.42 cents a gallon; natural gas was 0.5 cent lower to 1.5 cents higher, with March at $1.348 per 1,000 cubic feet.

Precious metals posted modest gains on New York’s Commodity Exchange, partly on unconfirmed rumors that the ground battle had begun in the Gulf War.

Silver futures recovered a fraction of the steep losses the market suffered Monday when it fell to its lowest level in more than 17 years.

Gold finished 90 cents to $1.20 higher, with February at $368 an ounce; silver was 0.9 cent to 2 cents higher, with February at $3.704 an ounce.

Market Roundup, D6