FINANCIAL MARKETS : STOCKS : Traders Take to Sidelines; Dow Down 9.9

Stocks fell Thursday as investors took a breather from the recent rally, and for the second day in a row the Dow Jones industrial average failed to make a sustained break into record territory.

The Dow closed down 9.90 points to 2,963.37, after trading in a narrow range for most of the day. Big Board volume retreated to 197.1 million shares from 262.3 million Wednesday.

In the broader market, declining issues outnumbered advances by about 10 to 9 in nationwide trading of New York Stock Exchange-listed stocks, with 752 up, 838 down and 466 unchanged.

Stocks meandered after Wednesday’s roller-coaster session, when the 30-share Dow twice rose into record ground above the historic 3,000 level. The Dow ended just 0.75 points higher Wednesday.

Investors exercised caution Thursday before the release of today’s February employment data.

The report will be the first government data showing how the economy performed last month. Many investors are hoping for further signs of weakness so the Federal Reserve will cut interest rates again to stimulate economic growth. But Wall Street doesn’t want to see an economy so weak that it suggests that no recovery is in sight.

Economists expect unemployment for February to rise to 6.3% from 6.2% in January--a 3 1/2-year high. And non-farm payrolls are expected to fall by 98,000 after a decline of 232,000 in January.

Even without the employment report, “the market got a little frothy” in recent days, Thom Czech, an analyst at Blunt, Ellis & Loewi, said in explaining Thursday’s pause.

A. C. Moore, analyst at Argus Investment Management, said, “We run into automatic (computerized) sell programs at the 3,000 level so it takes some oomph to get through there, and currently the (market) doesn’t have that kind of momentum.”

Among the market highlights:

* Many tech stocks continued to advance. Apple Computer rose 4 1/4 to 67 1/4 after a court ruling in Apple’s favor in a software copyright dispute with Microsoft, which slid 3 1/4 to 104. Among other techs, Digital Equipment gained 2 5/8 to 81 3/4, Unisys rose 1 1/8 to 5 1/2, Ashton-Tate jumped 1 1/8 to 8 7/8, Advanced Logic was up 1/2 to 16 and computer tape-drive maker Rexon gained 1/2 to 8 1/2.

* Airline stocks weakened anew, apparently on worries about how bad first-quarter profits might be. Delta lost 5/8 to 77 1/8, AMR (American) fell 1 to 59 7/8 and UAL (United) dropped 1 3/4 to 146 1/2.

* Among Southland stocks reacting to earnings, electronics distributor Marshall Industries lost 3/4 to 24 after saying earnings in the quarter just ended will be in the 41- to 44-cent-a-share range, down from 53 cents a year ago.

Construction firm Kasler added 1/4 to 18 5/8 on a strong earnings report. But Modtech, which makes modular school classrooms, plunged 2 1/4 to 9 1/2 on an apparently disappointing report.

* Thousand Oaks-based Amgen jumped 9 1/4 to 122 1/4, building on a rise of 12 Wednesday after a federal court ruled that rival Genetics Institute infringed on its anti-anemia drug patent. Genetics Institute fell 1/4 to 40. It lost 21 3/4 in Wednesday’s trading.

* El Segundo-based International Recitifier eased 1/8 to 17. The semiconductor firm filed to sell 4.2 million shares of stock.

* Gap rose 3 5/8 to 49 5/8 after posting strong earnings. Most retail stocks were flat to lower after reports of weak February sales.

Share prices closed sharply lower on London’s Stock Exchange, with the Financial Times 100-share average losing 22.2 points to 2,437.7.

In Frankfurt, shares ended lower after a roller-coaster ride. The 30-share DAX index finished down 13.86 points at 1,580.46.

Stocks closed slightly higher in Tokyo trading. The key 225-share Nikkei average was up 14.97 to 26,397.96.

Credit

Retailers’ woes and expectations of grim February jobless statistics sent bond prices higher.

The Treasury’s bellwether 30-year bond rose 9/16 point, or $5.63 per $1,000 in face amount, at closing Thursday. Its yield fell to 8.21% from 8.27% late Wednesday.

Longer-term Treasuries strengthened after the Labor Department reported that initial claims for state unemployment insurance rose sharply in the week ended Feb. 23.

Also Thursday, the nation’s retailers reported a drop in sales last month. Both reports indicated weakness in the economy, which tends to push interest rates down.

The federal funds rate, the interest on overnight loans between banks, was quoted at 6.375%, up from 6% late Wednesday.

Currency

The dollar rose against major European currencies but fell slightly against the Japanese yen in quiet trading.

Many market participants remained on the sidelines before the monthly jobs report due today.

The dollar is expected to benefit should the unemployment picture improve, since the Federal Reserve would have little reason to lower interest rates if the economy is recovering. Lower interest rates are bearish for the dollar because they make dollar-denominated securities less valuable for investors.

John McCarthy, chief dealer at Algemene Bank Nederland in New York, said he is continuing to see strong corporate demand for the U.S. currency. “The short-term sentiment is certainly in favor of the dollar,” he said, adding that the currency has been boosted by repeated gains in both the stock and bond markets.

The dollar rose in New York to 1.546 German marks versus Wednesday’s 1.538, but fell to 135.65 Japanese yen from 135.70.

The British pound was quoted at $1.888, down from $1.895 on Wednesday.

Commodities

Silver rallied to a spot delivery price of just under $4 an ounce on New York’s Commodity Exchange, extending a recovery driven by perceptions that the recession is easing.

Silver futures settled 10.5 to 12 cents higher in New York, with the contract for delivery in March at $3.97 an ounce. The March contract traded as high as $3.99 during the session, the highest spot silver price since Jan. 22.

Silver has risen by nearly 14% since Feb. 22, when it dropped briefly below $3.50 an ounce for the first time in 17 years.

The rally mainly reflects ideas that the end of the Gulf War will hasten a turnaround in the U.S. economy and lead to increased industrial demand for silver, analysts said.

Gold futures settled 80 cents to $1 higher on the Commodity Exchange, with April at $368.50 an ounce; platinum was 50 to 60 cents lower on the New York Mercantile Exchange, with April at $400.50 an ounce.

Oil and gasoline futures weakened on the New York Mercantile Exchange amid profit taking and nervousness before Monday’s OPEC meeting in Geneva.

Light sweet crude oil finished 21 to 39 cents lower, with April at $19.42 a barrel.

Market Roundup, D6