FINANCIAL MARKETS : STOCKS : Traders See a Chance to Cash In; Dow Off 31

The stock market suffered an afternoon setback Thursday, reversing some of the advance of the previous session that carried the early 1991 rally to new highs.

The Dow Jones average of 30 industrials, which rose 34.41 Wednesday, dropped 31.93, or 1.1% to 2,877.23.

Declining issues outnumbered advances by about 5 to 3 in nationwide trading of New York Stock Exchange-listed stocks, with 612 up, 1,033 down and 402 unchanged.

Big Board volume came to 230.75 million shares, against 209.96 million the previous session.

On Wednesday, though the Dow industrials remained below the record closing high of 2,999.75 reached last summer, some broader indicators hit new closing peaks.

Thursday, the market continued to benefit early in the day from catch-up buying by money managers who were caught sitting with large cash reserves when prices took off in January.

But as Thursday’s session progressed, brokers said, stocks apparently reached a level where increasing numbers of traders wanted to cash in some of their gains. The Dow was off nearly 45 points in late afternoon.

There didn’t appear to be a specific news development that touched off the selling. Some observers theorized that it may have reflected increasing caution over the prospect of land fighting in the Gulf War.

Among market highlights:

* Technology stocks led the market lower in profit taking. Microsoft dropped 4 3/4 to 100 3/4, Apple fell 2 7/8 to 57 1/8, SynOptics tumbled 3 1/4 to 48 1/4, AST Research gave up 2 to 44 3/4 and Compaq fell 2 1/8 to 70 1/8. Tandon Corp. slumped 7/16 to 3-7/16 despite reporting sharply higher quarterly profits.

* The Dow index was pulled down by Alcoa, off 2 1/8 to 67 5/8; Du Pont, off 1 5/8 to 37 5/8, and 3M, off 2 to 91 1/4. Oil stocks in the index also were weak, including Chevron, down 1 1/4 to 72.

* Among banks, Wells Fargo dropped 3 5/8 to 72 on profit taking after Moody’s Investors Service said it was reviewing the bank holding company’s credit rating for a possible downgrade. Other bank losers included Security Pacific, down 2 1/8 to 25 1/8, and First Interstate, off 1 7/8 to 34 1/2.

* Nike lost 4 1/4 to 46 5/8 after analysts at several brokerages lowered estimates for the company’s third-quarter and year-end earnings on expectations of a slowdown in its reorder business.

* Pasadena-based adhesives firm Avery Dennison fell 3/4 to 24 after saying that it expects first-quarter earnings to be down 25% from a year ago, although it added that it is “difficult” to forecast results because of the recession.

* Among Southland stocks that continued to advance despite the broad market slump were health-maintenance firm FHP, up 1/2 to 20 1/4; investment firm Craig Corp., up 1/4 to 14 3/4; medical instruments firm Diagnostic Products, up 1 1/4 to 37 1/4, and Earl Schieb, up 1 to 13.

In London, shares ended firm but off the day’s highs. The Financial Times-Stock Exchange 100 index jumped 26.6 to 2,294.4.

In Frankfurt, an early wave of buying pushed stocks sharply higher, but it quickly faded and shares ended mixed. The DAX 30 index lost 2.89 to 1,486.52.

In Tokyo, stocks closed firmer for the eighth straight day in the heaviest trading in more than a year. The Nikkei average rose 216.90 to 25,356.37. Early today, the Nikkei slipped 243.42.

Credit

Bond prices were mixed in another quiet session in which many traders waited for release of new economic reports.

The price of the Treasury’s bellwether 30-year bond, little changed the past two days, fell 13/32 point, or about $4.06 per $1,000 in face value. The bond’s yield was 7.99%, up from 7.95% Wednesday.

The federal funds rate, the interest on overnight loans between banks, was quoted at 7%, up from 6.125% late Wednesday.

Currency

The dollar advanced Thursday after Britain and Spain cut their interest rates, making the U.S. currency relatively more attractive. But currency dealers worldwide said trading was light.

In Tokyo, the dollar rose 1.05 yen to a closing 129.75. In New York, the dollar settled at 129.67 yen, unchanged from Wednesday. Against the German mark, the dollar closed at 1.466, up from Wednesday’s 1.463.

Foreign interest rates have largely remained high this year, despite the sharp drop in U.S. rates. The higher overseas rates have made bond investments in those countries more attractive than dollar-denominated bonds. However, the rate cuts in Britain and Spain may portend the start of a worldwide drop in rates, some analysts say, although Germany and Japan show no signs as yet of lowering their rates. (Market Beat, D3.)

Commodities

Prices of sugar futures rose Thursday on New York’s Coffee, Sugar & Cocoa Exchange as traders shrugged off a private forecast for a large world surplus and focused on the financial problems of a large British sugar merchant.

World sugar futures settled 0.03 to 0.22 cent higher, with the contract for delivery in March up 0.22 cent at 8.5 cents a pound.

Silver futures soared on New York’s Commodity Exchange but finished well below the day’s highs on fears that a walkout at Mexico’s Penoules silver mine could stretch into a strike.

Silver finished 8 to 8.1 cents higher, with March at $3.833 an ounce. The contract traded as high as $3.92 during the session.

Gold was 70 cents to $1 higher, with February at $368.20 an ounce.

Oil futures prices retreated on the New York Mercantile Exchange in trading driven by a decline in demand for home heating oil.

Light sweet crude oil settled 2 to 28 cents lower, with March at $22.32 a barrel; heating oil was 0.60 cent to 1.18 cents lower, with March at 65.95 cents a pound; unleaded gasoline was 0.67 cent to 1.15 cents lower, with March at 61.59 cents.

Market Roundup, D8