STOCKS : Bargain Hunters Pull Dow Out of Doldrums

Blue chip stocks snapped a two-day losing streak Wednesday, nudged higher by investors hunting for bargains.

But the broader market was mixed, with shares under pressure again as Wall Street fretted over prospects for second-quarter corporate earnings.

The Dow Jones industrial average inched up 2.90 points to 2,913.01. But smaller-stock indexes fell, and on the New York Stock Exchange 872 issues lost ground while 699 rose.

Big Board volume totaled 187.4 million shares, up from Tuesday’s 155.45 million.

A late flurry of computer-driven program buying helped lift the Dow off its daily lows. But analysts said investors remain wary overall.

“It’s almost like a growing number of investors have suddenly accepted the fact that we’re going from recession to recovery and they’re impatient about improving earnings,” said William LeFevre, strategist at Tucker Anthony.

Analysts say investors may be ill-prepared for more bad earnings surprises as second-quarter reports begin to roll out next week.

Among the market highlights:

* Wells Fargo slumped an additional 3 5/8 to 70 3/8 after tumbling 6 3/4 Tuesday on a dismal earnings forecast. Other bank stocks were mixed. First Chicago lost 1 1/2 to 21 1/8, but Security Pacific rebounded 1/2 to 23 3/4.

* Troubled Southland retailer STOR plunged 3/4 to 7/8 after reporting a quarterly loss of $1.15 a share on a 13% decline in revenue.

* Among stocks rebounding on apparent bargain hunting were Computer Sciences, up 1 3/4 to 68 1/4; Motorola, up 2 3/8 to 67 3/4, and H&R; Block, up 1 3/8 to 56. Biotech firm Amgen, which dropped 5 Tuesday, rose 1 3/4 to 110 3/4 after Shearson Lehman repeated a buy rating.

* Forecasts of higher second-half earnings at Southland home builder Kaufman & Broad failed to help the stock, which lost 3/4 to 13 1/8 after the latest quarter’s profit came in at 11 cents a share, down from 46 cents a year ago. Meanwhile, the firm’s former sister operation, financial services company Broad Inc., rose 1/2 to 11 after forecasting that it will meet or beat 1991 earnings forecasts of $1 to $1.25 a share.

Overseas, German shares ended weaker as talk of possible interest rate rises heated up. The Frankfurt market’s DAX average lost 19.33 points to 1,672.14.

In London, shares hit their lowest closing level in three months. The Financial Times 100-share index fell 23.9 points to 2,437.3.

After a morning surge, the Tokyo market drifted until falling futures prices and a selloff of issues linked to one of the scandal-tainted Big Four brokerages sparked a drop just before the close. The 225-share Nikkei average declined 141.04 points to 23,766.38.

Credit

Bond prices ended mixed, dragged down by lackluster investor response to an auction of five-year Treasury notes.

The Treasury’s bellwether 30-year bond edged up 1/16 point, or 63 cents per $1,000 in face amount. Its yield was unchanged at 8.51%.

The 30-year bond’s slight gain masked an earlier price swing in which bonds rose about 1/4 point in anticipation of an upbeat auction, but were pulled off their highs by disappointing results.

A total of $9.3 billion in five-year notes was sold out of bids totaling $25.9 billion. The average yield was 7.96%, up from 7.69% at the last auction May 23.

Carol A. Stone, senior economist for Nomura Securities International Inc., said the number of bidders was “not extraordinarily high.” This disappointed some market participants, she said.

The federal funds rate, the interest on overnight loans between banks, was 5.375%, down from 5.875% Tuesday.

Currency

The dollar declined amid speculation that interest rates would rise in Germany.

Analysts said the mark was the focus of trading one day before Germany’s central bank, the Bundesbank, was expected to raise rates in hopes of cooling inflation.

Like all currencies, the mark is supported by higher interest rates, which increase demand for German investments.

The dollar tends to fall when interest rates rise in other countries because U.S. rates become less competitive.

The dollar fell to 1.787 marks in New York from Tuesday’s 1.793. It slipped to 138.27 Japanese yen from 138.30. The British pound gained against the dollar, rising to $1.6385 in New York from $1.631.

Commodities

Prices of grain and soybean futures finished mixed after an active trading session on the Chicago Board of Trade. Prices were supported by decreased expectations of weekend rain but were weakened by profit taking.

Corn futures closed marginally higher. Corn, entering a critical pollination period in early July, could fail to develop properly because of lack of rainfall. A disastrous harvest would mean higher wholesale prices.

On the New York Mercantile Exchange, light, sweet crude settled 3 cents lower to 3 cents higher, with August at $20.08 a barrel.

Precious metals futures were mixed on New York’s Commodity Exchange. Gold was $1.30 to $1.40 higher, with June at $365.90 an ounce; silver settled 1.8 to 2 cents lower, with June at $4.35.

Market Roundup, D6