STOCKS : Further Bond Losses Push Dow Down 7.15

Blue chip stocks closed lower Tuesday, hurt by further losses in the bond market and signs that the Federal Reserve is unlikely to reduce interest rates any time soon to bolster the economy.

The Dow Jones industrial average lost 7.15 points to 2,986.81. Most broader indexes showed bigger percentage losses.

Losers outnumbered winners on the New York Stock Exchange, with 893 down, 615 up and 558 unchanged.

Big Board volume came to 154.92 million shares as of 4 p.m. EDT, up from 133.91 million in the previous session. Volume in the two after-hours trading session totaled 1.36 million shares.

The market rallied early, with the Dow up nearly 20 points. But that rally lost steam when Federal Reserve Chairman Alan Greenspan told Congress it was too early to say the recession is over.

Even though Greenspan sounded somewhat pessimistic, he also suggested that the economy was at least bottoming. That was interpreted as meaning the Fed won’t cut interest rates further. On that comment, interest rates in the bond market inched up, hurting stocks.

A late advance in IBM helped blue chips trim their losses. IBM rose 1 3/8 to 100 7/8 after falling below 100 on Monday. Generally, the stock attracts attention whenever it falls below that benchmark. “That helped to take the market up,” one trader said.

Overall, traders said stocks continued to show a confused pattern as investors attempt to decipher the economy’s next move.

Among the market highlights:

* Some growth stocks came under new pressure. Pepsico topped the Big Board’s most-active list, losing 1/2 to 30 3/8. Wertheim Schroder trimmed its quarterly earnings estimate for the company, citing higher potato costs at the Frito-Lay division.

Also, ConAgra fell 1 3/4 to 44 1/8 after the food company forecast earnings up 10% in the recent quarter, while also warning that earnings face pressure in the current quarter. Other food stock losers included Heinz, down 7/8 to 37 1/8; Coca-Cola, down 7/8 to 55 1/8, and Quaker Oats, off 5/8 to 61 3/8.

* Many industrial stocks inched higher. Monsanto rose 3/4 to 69 5/8, Phelps Dodge gained 1 3/8 to 67 5/8, Bethlehem Steel jumped 5/8 to 18 1/8, and W. R. Grace was up 7/8 to 34 3/8. Chemical firm Olin added 1 1/2 to 51 1/8 after a Paine Webber analyst repeated a buy rating on the stock.

Also, Ashland Coal gained 1 5/8 to 24 1/2. Donaldson Lufkin & Jenrette raised its rating on the company.

* On the down side, tech stocks were in the spotlight again. In Focus Systems plunged 6 to 11 1/4. The company said its profit margins had eroded and that third-quarter earnings would probably be dampened by the recession.

Software concern Legent Corp. dropped 4 1/2 to 27 1/4. Robertson Stephens issued cautious comments on the company’s third-quarter business.

* ICF International, an environmental consulting firm, dropped 3 1/2 to 11 1/2. It postponed a planned offering of new shares because first-quarter earnings fell below the year ago’s 15 cents a share.

* L.A.-based food distributor Rykoff-Sexton rose 1/2 to 20 1/2. It reported quarterly earnings of 31 cents versus 18 cents a year ago.

* El Segundo-based industrial filter maker Farr Co. closed up 1/4 at 12 1/4. But after the close, the firm said it will record a substantial quarterly loss after taking a charge for an acquisition it made in April.

In overseas trading, British shares closed slightly lower. The Financial Times 100-share average ended down 8 points at 2,516.0.

In Frankfurt, the DAX average slipped 5.65 points to 1,695.42.

In Tokyo, stocks continued their consolidation after last week’s gains. The Nikkei average fell 257.62 points to 24,685.47.

In Mexico City, the Bolsa index slipped 4.76 points to 1,090.61.

Credit

Prices of long-term Treasury bonds slumped after uncertainty about the economy eroded earlier optimism that interest rates would decline further.

The bellwether 30-year bond fell 7/32 point, or $2.19 per $1,000 in face amount. Its yield inched up to 8.51% from 8.49% late Monday.

Analysts said some traders were heartened by Fed Chairman Greenspan’s comments to Congress about the economy’s slow progress out of recession. That seemed to leave the door open for further interest-rate cuts. But Greenspan later indicated that he at least sees a bottom in the economy, and that turned some traders bearish.

Also, a rumor circulated during afternoon trading that Greenspan was resigning. But many traders ignored it, said Mike Casey, international economist for Maria Ramirez Capital Consultants, because Greenspan has made it clear he wants to be reappointed.

The White House has yet to announce the reappointment of the central bank chairman.

The federal funds rate, the interest on overnight loans between banks, was quoted at 5.688%, down from 6.50% late Monday.

Commodities

Cattle futures prices suffered on the Chicago Mercantile Exchange on traders’ expectations that a Department of Agriculture report would present little good news about a surplus of stocks.

Live cattle prices settled 0.30 to 0.10 cent lower, with the contract for delivery in June at 74.57 cents a pound; feeder cattle settled 0.03 cent lower to 0.07 cent higher, with August at 88.62 cents a pound.

Elsewhere, precious metals on New York’s Comex overcame opposition from a strong dollar and were mostly higher. Gold settled $2 lower to $1 higher, with June at $368.50 an ounce; silver was 0.5 cent to 1.2 cents higher with June at $4.45.

Light sweet crude oil for delivery in July settled at $20.13 per barrel, up 19 cents, at the New York Mercantile Exchange.

Market Roundup, D6