STOCKS : Dow Up 4.21 as Investors Hunt for Bargains

Blue chip stocks eked out a small gain Wednesday as bargain hunters came into the market.

The Dow Jones industrial average closed up 4.21 points at 2,872.03, after tumbling 62.13 on Tuesday.

In the broader market, advancing issues outnumbered declines by about 5 to 4 in nationwide trading of New York Stock Exchange-listed stocks, with 850 up, 671 down and 514 unchanged.

Big Board volume rose to 196.81 million shares from Tuesday’s 177.07 million.

“A lot of the selling we saw has subsided. Some people are buying some cheap stocks,” said trader Dale Tills at Charles Schwab & Co.

On Tuesday, the Dow slumped after IBM said quarterly earnings would be far below expectations. The forecast raised questions about the health of the economy, which many investors had believed was on the mend. “It looks like the psychology has changed, and not for the better,” said Hugh Johnson, analyst at First Albany.

Still, the support that stocks found Wednesday suggested that many investors remain eager to buy, perhaps after having missed the February rally.

“We’ve punctured the panic balloon that went up yesterday,” said Jack Solomon, a technical analyst at Bear, Stearns & Co.

Among the market highlights:

* The market reacted swiftly to new earnings disappointments. Chemical Waste Management tumbled 3 1/4 to 19 3/8 after forecasting lower first-quarter earnings because of economic weakness. Its parent firm, Waste Management, lost 3 to 38. Other waste firms were only marginally lower, however.

Elsewhere, 3M Co. dropped 2 1/8 to 87 1/2 after it signaled that first-quarter earnings would be weak. And Kodak gave up 1 5/8 to 41 7/8 after saying slumping tourism would hurt first-quarter results. Both stocks are in the Dow index.

* IBM continued to weaken, losing 1 to 114 1/8 after plunging 12 3/4 Tuesday on its earnings forecast. Also, Software Publishing dropped 1 5/8 to 24 7/8. It said lower sales would hurt quarterly results. Other techs declining further included Digital Equipment, down 1 1/8 to 70 1/4, and Compaq, off 1 3/4 to 59 1/2.

But Adobe Systems jumped 4 1/8 to 51 7/8 after reporting strong first-quarter earnings.

And many smaller techs showed renewed strength. Among Southland stocks in the group, FileNet gained 5/8 to 12, DH Technology added 1 1/4 to 11 1/4, Tekelec rose 3/4 to 19 3/4 and Odetics class A shares were up 5/8 to 6 3/8. Software firm MacNeal-Schwendler added 1/4 to 16 3/4. After the close it reported fourth-quarter earnings up 18%.

* Drug and food stocks staged strong rebounds from recent profit taking. Kellogg rocketed 4 1/2 to 93 after Goldman Sachs touted it. Among other food stocks, Coca-Cola gained 1 3/8 to 54 5/8 and Campbell Soup rose 2 1/2 to 77.

In the drugs, Warner-Lambert jumped 3 1/4 to 74, after taking a beating in recent days. Upjohn rose 3 5/8 to 47, Amgen was up 1 1/2 to 125 and Pfizer gained 3 3/8 to 104.

* Other health-care stocks also attracted buyers, including Santa Barbara-based medical devices maker Mentor Corp., up 2 1/8 to 26 1/2, health-maintenance firm U.S. Healthcare, up 3 3/4 to 50 1/2, and nursing home firm Beverly Enterprises, up 3/4 to 10 3/4.

The Mexican stock market surged to a new high, though in slow trading. The Bolsa price index jumped 17,497, or 2.4%, to close at 763,109.00. The market has gained in recent weeks as foreign institutions have committed funds that were frozen while the Gulf War was ongoing, traders said. Many large Mexican firms are expected to gain from any potential North American free trade pact.

In other foreign markets: German stocks slumped. The 30-share Dax average plunged 28.61 to 1,517.92. In London, shares closed lower but above the day’s lows. The Financial Times average of 100 leading shares was down 17.8 points at 2,441.2.

In Tokyo, the key 225-share Nikkei average closed down 557.31 to 26,449.35.

Credit

Bond prices rebounded in what traders called a small technical rally after several losing days.

The Treasury’s benchmark 30-year bond rose 5/8 point, or $6.25 per $1,000 in face amount, after losing 25/32 point Tuesday. Its yield fell to 8.34% from late Tuesday’s 8.40%.

Reports of rising inflation and a recovering economy have sapped the bond market in the past two weeks. The selling accelerated after Tuesday’s release of the consumer prices for February.

“We were in such oversold territory it was unbelievable,” said Marilyn Cohen, broker for Capital Insight of Beverly Hills.

Mike Casey, economist for Ramirez Capital Consultants, said the market rebounded Wednesday partly because traders saw individual investors snapping up some bonds to lock in higher yields.

The federal funds rate, the interest on overnight loans between banks, was quoted at 6.50%, up from 6.188% late Tuesday.

Currency

The dollar ended mixed in cautious selling after Tuesday’s jump.

“People have been getting whacked around over the last couple of weeks and (Tuesday) was the icing on the cake,” said manager Peter Connolly at Wells Fargo in San Francisco. “Even if you’re able to call it right, it’s difficult.”

In New York, the dollar closed at 1.642 German marks, flat with Tuesday’s close. On Tuesday, the dollar gyrated wildly between 1.618 and 1.674 marks.

The dollar ended at 138.30 Japanese yen Wednesday, compared to 137.55 on Tuesday.

News that the U.S. trade deficit in January was smaller than expected at $6.99 billion supported the dollar briefly, as did reports that a U.S. fighter jet downed an Iraqi jet over northern Iraq.

Commodities

Prices of silver futures fell sharply, erasing the previous day’s gains.

Silver settled 8.5 to 10.4 cents lower on New York’s Commodity Exchange, with the March contract at $3.94 an ounce.

Gold ended 80 cents to $1 lower on the Comex, with March at $363 an ounce; platinum finished $2 to $2.10 lower on the New York Merc, with April at $396.70.

Wednesday’s silver selloff was led by speculators after they failed to bid the May delivery price above Tuesday’s high of $4.10 an ounce, said Peter Cardillo, analyst with Jesup Josephthal in New York.

Elsewhere, unleaded gasoline futures surged on the New York Merc, largely in reaction to the American Petroleum Institute’s weekly report showing an unexpectedly large drop in U.S. gasoline supplies to 216.4 million barrels from 241.2 million a year ago.

The gasoline market also continued to be supported by the shutdown of a large Mexico City oil refinery that produces 40,000 barrels of gasoline daily, analysts said.

The April crude oil contract expired Wednesday at $20.38 a barrel, down 23 cents.

Market Roundup, D6