STOCKS : Investors Wary About War; Dow Sheds 2.47

Stock prices closed mixed Tuesday as some investors trimmed positions and awaited the next step in the month-old Persian Gulf War.

After a dizzying ascent last week, capped by a 57-point rise Friday, the Dow Jones industrial average eased 2.47 points to close at 2,932.18.

Declining issues outnumbered advancers on the New York Stock Exchange, with 857 down, 779 up and 400 unchanged.

However, broader market indexes continued to advance to new all-time highs, including the Standard & Poor’s 500 index, up 0.33 points to 369.39, and the New York Stock Exchange composite, up 0.11 points to 201.40.

Big Board volume totaled 189.90 million shares, against 222.37 million shares on Friday. The stock market was closed Monday for the Presidents’ Day holiday.

Traders were cautious amid conflicting signals about prospects for a quick resolution to the Gulf conflict.

Soviet President Mikhail S. Gorbachev offered a new peace formula Monday that was said to include a guarantee that Saddam Hussein can stay in power if he pulls his army from Kuwait.

The initiative from the Soviet Union got a chilly reception from President Bush, and U.S.-led forces forged ahead with preparations for a land battle against Iraq.

“People are waiting for either peace or a ground war,” said analyst David Chao at County NatWest Bank. “It looks like the market is taking a little rest here.”

Still, the selloff was limited, and small stocks that have led the market lately showed no signs of slowing their advance. The NASDAQ composite index rose 1.61 points to 450.32.

Among the market highlights:

* Many major technology stocks posted snappy gains, led by Hewlett-Packard, which jumped 5 1/2 to 45 5/8 after reporting strong quarterly results. IBM climbed 2 1/8 to 139 1/2, Digital Equipment rose 3 1/2 to 78 and Apple added 2 3/8 to 60.

Some smaller tech issues were hit by profit taking, however. Micropolis lost 5/8 to 11 3/4, MacNeal Schwendler fell 1/2 to 15 1/4, Tandon Corp. dropped 11/32 to to 3 2/32 and Archive gave up 1/4 to 6 7/8.

* Philip Morris jumped 3 to 65, helping to limit the Dow index’s loss. C. J. Lawrence reiterated a buy rating on Morris and raised its 1992 earnings estimate. Food stocks in general attracted new money, including Ralston Purina, up 3 1/8 to 103 5/8, CPC, up 1 3/4 to 83 1/4, and Chiquita, up 1 1/4 to 36 5/8.

* On the downside, Deere tumbled 3 1/4 to 49 3/8 after the farm equipment manufacturer reported a loss that was deeper than expected. But rather than dump industrial stocks as a group, investors continued to bid up those expected to emerge quickly from the recession, including Ingersoll-Rand, up 1 1/8 to 47 5/8. The machinery group as a whole may benefit today: After the close last night, Square D received a $78-a-share, $1.8-billion takeover offer from Schneider SA of France. Square D closed at 52, up 1 3/4.

* Liz Claiborne rocketed 5 to 41 1/2. Analysts at C. J. Lawrence and Prudential-Bache reiterated buy ratings after the retailer reported fourth-quarter results that were above Wall Street estimates.

In Tokyo, stocks closed easier but off lows in heavy trade, with buying and profit taking swinging the market widely. The Nikkei 225-share average closed 63.03 points lower at 26,166.98.

Shares also closed lower on London’s Stock Exchange as the prospect of a speedy peace settlement in the Persian Gulf conflict faded. The Financial Times 100-share index closed down 5.9 points at 2,312.4.

German shares gained even though profit taking knocked prices off Tuesday’s new 1991 highs, and dealers said the mood of the market remained positive. The 30-share DAX index ended 14.56 points up at 1,587.13.

Credit

Bond prices were pushed down largely by uncertainty about the Federal Reserve’s monetary policy in the face of Middle East peace prospects.

The Treasury’s bellwether 30-year bond fell 5/32 point, or $1.56 per $1,000 in face amount. Its yield, which moves in an opposite direction from price, inched up to 7.99% from 7.98% late Friday.

The federal funds rate, the interest on overnight loans between banks, was quoted at 6%, up from 4% late Friday.

In the tax-exempt market, the Bond Buyer index of 40 actively traded municipal bonds was down 3/16 point to 92 27/32. The average yield to maturity edged up to 7.25% from 7.24% late Friday.Currency

The dollar jumped on world currency markets, advancing on optimism that the Soviet peace proposal may help bring the Persian Gulf War to a close soon.

An end to the war “would give a big boost to consumer confidence and therefore would lead to an upturn in the U.S. economy, which is positive for the dollar,” said Earl Johnson, a vice president at Harris Trust & Savings Bank in Chicago.

The dollar began rising on Friday after Saddam Hussein proposed a conditional withdrawal from Kuwait, even though the United States dismissed the offer as a “hoax.”

In New York, the dollar ended at 1.493 German marks, up from 1.477 Friday. The dollar settled at 131.58 Japanese yen, up from 130.50 on Friday, and the British pound fell to $1.949 from Friday’s $1.967.

Commodities

Silver futures prices fell sharply as hopes for a diplomatic solution to the Gulf War gave way to fears of a ground battle that could prolong America’s recession.

Oil prices zigzagged, dropping initially to their lowest in seven months in London but managing to hold at four-week lows in New York, as traders awaited word on the Soviet peace plan to end the Gulf War.

Oil for March delivery on the New York Mercantile Exchange closed down 81 cents at $20.07 a barrel, the lowest since the U.S.-led air attack on Iraq began on Jan. 17.

On other commodity markets, gold futures were little changed; orange juice futures tumbled; livestock and meat futures rose, and grains and soybeans were mixed.

Silver futures settled 9.3 to 10.5 cents lower on New York’s Commodity Exchange, with the contract for delivery in March at $3.69 an ounce. Gold finished nearly unchanged, with the February contract up 10 cents at $364.50 an ounce.

Silver and gold both opened lower amid Middle East peace hopes raised by the Soviet Union’s discussions with Iraqi officials. Gold prices recovered after President Bush rejected the plan, but silver remained weak, reflecting ideas that industrial demand for the metal will suffer if the war prolongs the recession, analysts said.

James Steel of Refco Inc. in New York said that for gold, a ground war “could be bullish, purely on the safe haven argument” that the metal is a superior investment in stressful times.

Steel said strength in the dollar Tuesday contributed to silver’s weakness.

Bette Raptopoulos, senior metals analyst with Prudential-Bache Securities, said much of the selling in silver reflected perceptions that the market was poised for another leg down. Market Roundup, D8