STOCKS : Dow Loses 7.38 as Investors Take a Breather
Blue chip stocks snapped their six-day winning streak Tuesday, as investors paused to catch their breath after back-to-back record highs.
The Dow Jones industrial average closed down 7.38 points at 3,027.95 points. The index had soared 135.29 points the previous six sessions.
Advancing issues evenly matched declining ones in nationwide trading of New York Stock Exchange-listed stocks, with 789 issues rising, 789 declining and 507 unchanged. Broader market indexes were mixed.
Big Board volume was a moderate 180.5 million shares, up from Monday’s 174.0 million.
“The market needed a few days of consolidation after its recent run-up,” said Thom Brown, managing director of Rutherford, Brown & Catherwood.
Analysts said the market was pressured by daylong profit taking, particularly in “cyclical” stocks that are tied to the health of the economy and have benefited from expectations that the economy is on the mend.
The Dow closed at record highs on Monday and Friday amid signs that the economy may be emerging from recession.
But on Tuesday, investors chose to book profits early, prompting the Dow to slide at the opening bell. The index was off more than 25 points during the session, but pared losses by the close.
Analysts said the market may consolidate further, but many agreed the bias is still up.
“There hasn’t been a change in psychology,” said Paul Kronlokken of Piper, Jaffray & Hopwood Inc.
Analysts said the next focus of attention will be the Labor Department’s release of May employment data on Friday. The report will offer more clues about the economy’s health.
Among the market highlights:
* Industrial stocks that fell after recent sharp gains included Phelps Dodge, off 1 1/2 to 64 1/8; Thomas & Betts, down 3 3/8 to 57 1/2; Cooper Industries, down 1 7/8 to 54 1/4, and Ingersoll Rand, off 3/4 to 53.
But Goodyear rocketed 3 1/8 to 30 1/8 on news its CEO was replaced.
* Drug stocks, which had lost ground recently as investors moved their money into cyclical issues, posted modest gains in bargain hunting. Warner Lambert rose 2 to 71 5/8, Upjohn added 1 1/2 to 45 7/8, and Amgen rose 7/8 to 122 3/8.
* Bank stocks showed renewed strength on optimism about the economy and merger rumors. Wells Fargo leaped 2 3/8 to 96 3/4, First Interstate rose 1 7/8 to 42 1/8, Security Pacific soared 1 3/4 to 28 3/4, and Chase Manhattan rose 1 1/4 to 21 1/8.
* Among tech stocks, Southland issues were particularly active. Micropolis fell 1 1/8 to 13 1/8 after Kidder Peabody reportedly cut earnings estimates sharply.
Computer Sciences lost 1 7/8 to 64 5/8 on talk that the firm would lose a big contract with the state of New Jersey, though the company said the change would be “immaterial.”
Also, International Rectifier rose 1/2 to 25. Boston-based Fidelity Investments said it raised its stake in the firm to 7.1% recently.
* L.A.-based food distributor Rykoff-Sexton closed unchanged at 20 1/8. However, after the close, grain giant Archer Daniels Midland disclosed that it owns a 5.2% stake in Rykoff. ADM said the stake was for investment purposes and did not signal any takeover interest.
* Federal Express added 2 3/8 to 43 5/8. Kidder Peabody reaffirmed its buy rating for the stock, saying the company’s fundamentals are improving.
Overseas, German shares drifted lower as profit taking ate into share prices. The 30-share DAX average fell 8.73 points to end at 1,685.38.
In London, the Financial Times 100-share average closed 9.8 points lower at 2,506.0 points.
In Tokyo, stocks finished lower on a futures related selloff. The 225-share Nikkei average fell 355.75 points to close at 25,556.86.
Credit
Treasury bond prices nudged higher as traders expressed wariness over the impending release of the important unemployment report.
The Treasury’s 30-year bond rose 1/16 point, or 63 cents per $1,000 in face amount. Its yield held at 8.34%, the same as late Monday.
Bond analysts said Treasury prices rebounded from a sharp selloff on Monday, when a report on construction figures and a survey of purchasing executives pointed to an improving economy.
That selloff provided a few good deals for traders, leading them to buy issues in very light volume Tuesday, analysts said.
The bond market had little response to the worse-than-expected report on late May automobile sales, said Alan Levenson, director of financial markets for the Pennsylvania-based WEFA Group.
The federal funds rate, the interest on overnight loans between banks, fell to 5.81%, down from 5.87% late Monday.
Currency
The dollar fell against most major currencies as traders took profits after a string of gains on expectations for a recovery in the U.S. economy.
The dollar closed at 1.745 German marks in New York, compared to 1.748 Monday. It fell to 138.85 Japanese yen from 139.15 on Monday.
Commodities
Soybean futures prices fell moderately on the Chicago Board of Trade, reflecting favorable crop weather and disappointment over the lack of a Soviet food aid package.
Soybean futures settled 4.50 to 7.50 cents, lower with the contract for delivery in July at $5.7925 a bushel.
Oil futures ended lower on the New York Mercantile Exchange as an OPEC meeting got under way in Vienna. Light sweet crude oil futures settled 11 to 15 cents lower, with July at $21.02 a barrel.
In precious metal trading on New York’s Commodity Exchange, gold finished 50 to 60 cents lower, with June at $362.50 an ounce; silver was 1.3 to 1.5 cents lower, with June at $4.14 an ounce.
Market Roundup, D6
