STOCKS : Profit Taking Hits Blue Chips; Dow Off 14.76

Profit taking sent blue chip stocks lower on Wall Street on Tuesday, while smaller issues forged ahead on bargain hunting.

The Dow Jones industrial average closed down 14.76 points at 2,947.23, erasing exactly half of Monday’s 29.52-point gain.

Volume was a moderate 151.43 million shares on the New York Stock Exchange, where gainers led losers 797 to 744. Buyers were even more active in the NASDAQ market of smaller stocks, sending the composite index there up 4.13 points, or 0.9%, to 483.64.

“The only real action today is a lot of bottom-fishing,” said David Holt, analyst at Wedbush Morgan Securities in Los Angeles. “You have very little demand and very little supply.”

Among the market highlights:

* Many battered computer issues continued to rebound. Digital Equipment jumped 1 1/2 to 64 3/4, Sun Microsystems was up 7/8 at 29 5/8, Dell Computer added 1 to 28 1/2 and Advanced Logic rose 1 to 13.

Two Costa Mesa tech firms were active. FileNet jumped 1 1/4 to 16, despite warning of flat second-quarter earnings. Meanwhile, Emulex rose 7/8 to 8 3/4. It said earnings in the year just ended would be about 74 cents a share.

* Bank stocks also continued to rebound from their June plunge. Chemical Banking was up 1 3/8 to 23, BankAmerica rose 1 1/4 to 35 3/8 and Wells Fargo gained 1 1/8 to 69 3/8.

* Nike leaped 2 3/8 to 41 1/4. The shoe firm said it is comfortable with analysts’ estimates of $3.65 to $3.85 a share in earnings for the year ended last May 30. Elsewhere, retailer Price Club fell 1 1/2 to 54 1/4 after Goldman Sachs apparently lowered earnings estimates.

* L.A.-based Craig Corp. continued to soar, up 2 1/8 to 20 5/8 after trading as high as 24 1/8. The firm, which owns a major stake in supermarket chain Stater Bros., was the subject of speculation in a Business Week article that highlighted the potential value of its assets.

In Tokyo, the Nikkei average finished with a gain of 432.79 points to 22,608.96. It had plunged early in the session to a new 1991 low on continued concern about Japan’s unfolding stock brokerage scandal. Early today, the Nikkei’s rebound continued: It closed the morning session up 286.82 points to 22,895.78. (Related story, D3.)

In London, the Financial Times 100 index closed with a gain of 21.10 points to 2,487.90, riding Tokyo’s comeback. In Frankfurt, the DAX index likewise rose, adding 22.59 points to 1,627.63.

Credit

Bond prices moved lower in extremely light trading, as investors awaited a government auction and a report on inflation.

The Treasury’s 30-year bond dropped 11/32 point, or $3.44 per $1,000. Its yield rose from 8.49% to 8.53%, highest since June 12.

Kathleen Camilli, economist at Ramirez Capital Consultants, said there were no outstanding factors to explain the drop in bond prices other than investor hesitancy.

The Treasury plans to sell $9 billion in seven-year notes today, while government reports on producer prices and retail sales for June are due Friday.

The price of the Treasury’s one-year bill rose sharply because of demand from a large single investor, Camilli said. The yield on the bill fell to 6.28% from 6.31%.

The federal funds rate, the interest on overnight loans between banks, was quoted at 5.675%, down from 5.938% late Monday.

Currency

The dollar edged higher as traders expressed cautious optimism ahead of this week’s meeting of Germany’s central bank.

Currency dealers said traders generally don’t believe that the German Bundesbank policy makers will act to raise interest rates during their meeting Thursday.

However, cautiousness is keeping the dollar in a tight range.

In New York, the dollar rose to 1.817 German marks from Monday’s 1.805. The dollar also rose to 138.76 Japanese yen from Monday’s 138.55.

Commodities

Cotton futures prices dropped sharply on the New York Cotton Exchange as new data supported perceptions of increasing supplies.

Cotton futures settled 1.1 cent to the permitted daily limit of 2 cents lower, with the contract for delivery in October down 2 cents at 70.53 cents a pound.

Cotton’s tumble from May’s lofty levels mainly reflects a growing body of evidence that this year’s crop will be large enough to avoid the shortages that some analysts feared early in the season because of planting delays .

Elsewhere, oil prices posted modest gains on the New York Merc with light sweet crude oil finishing 5 to 19 cents higher, with August at $21.29 a barrel.

On New York’s Comex, gold was $1.50 lower across the board, with July at $369.40 an ounce; silver was 3.6 to 3.7 cents lower, with July at $4.43.

Market Roundup, D6