STOCKS : Dow Drops 29.74 to Close Below the 3,000 Mark

The stock market’s most widely watched index lost its struggle to stay above 3,000 Tuesday as a late selloff sliced about 1% off prices.

The Dow Jones average of 30 industrial stocks lost 29.74 to close at 2,983.23.

A fall in bond prices and computer-driven program trading helped set off the late slide in stock prices.

Declining issues outnumbered advancing ones by almost 2 to 1 on the New York Stock Exchange.

Big Board volume came to 160.10 million shares at 4 p.m., up from 148.90 million at the same point Monday. An additional 900,000 shares traded between 4 p.m. and 5 p.m.

Investors were finding fewer reasons to be aggressive buyers, market analysts said.

“We’re drifting into a sea of disinterest,” said Alan Ackerman, an executive vice president at Reich & Co.

While second-quarter corporate earnings so far have been slightly stronger than expected, the market is showing signs of tiring.

“I think there’s genuine nervousness about the recovery,” said Paul Hennessey at Boston Co.

Chief White House economist Michael J. Boskin said there was reason the Federal Reserve should adopt a “wait-and-see” attitude toward the economy and interest rate policy, at least in the short run.

The suggestion that interest rates would be held steady “probably kept the market dull and distracted,” Reich’s Ackerman said.

He also said problems at banks and insurance companies served to dampen enthusiasm. “It’s difficult to make a case for owning stocks at this level,” he said.

Among the market highlights:

* American Express topped the Big Board’s most-active list, rising 1 5/8 to 24 3/4. Its second-quarter profit exceeded Wall Street’s estimates.

* Another Dow component, Minnesota Mining & Manufacturing, did not fare as well, dropping 3 3/8 to 89 5/8. It forecast a weaker second half, prompting some analysts to cut profit projections.

* Chiron, which announced a merger with Cetus on Monday, fell 3 1/2 to 51 1/2. Merrill Lynch cut its rating to neutral from above average.

* Monsanto jumped 2 3/8 to 72 1/2 after reporting better-than-expected second-quarter operating earnings.

* Wells Fargo dropped 2 7/8 to 69 1/2. Shearson Lehman lowered its rating on the banking company.

Traders said Furman Selz removed General Motors from its recommended list. Its shares fell 1 1/8 to 41 1/8.

Stocks closed higher overseas. On the London Stock Exchange, shares soared to a new closing high. The Financial Times 100-share average closed 29.4 points higher at 2,587.9.

German shares ended a fairly quiet session 0.6% above Monday’s closing levels. The 30-share DAX average rose 9.91 points to 1,632.94.

In Tokyo, stocks ended mixed in thin trading. The key 225-share Nikkei average firmed 53.69 points to 22,758.98.

Credit

Prices of U.S. Treasury bonds fell slightly after a mediocre auction of two-year notes.

The Treasury’s 30-year bond was down 1/4 point, or $2.50 per $1,000 in face amount, at closing. Its yield was 8.49%, up from 8.46% late Monday.

There was little significant economic news to push bond prices in either direction during the day, said Raymond Dalio, president of Bridgewater Associates Inc. in Wilton, Conn.

Dalio said an auction of two-year notes “was not that great,” but he didn’t ascribe much significance to the outcome because of the thin trading volume.

Traders were expecting a higher yield and better demand at the auction of $12.5 billion of two-year notes. The average yield was 6.94%, the lowest level since May.

The federal funds rate, the interest on overnight loans between banks, fell to 5.675%, down from 5.75% late Monday.

Currency

The dollar slipped against most major currencies in a second day of light, uneventful trading.

Dealers said the dollar closed lower as traders sought direction on the state of the U.S. economy and the prospect for lower interest rates. Lower rates would tend to drive down the value of the dollar.

In New York, the dollar slipped to 1.758 marks from 1.762 marks late Monday. The dollar also dropped against the Japanese yen, to a closing 137.25 yen from Monday’s 137.65. The British pound strengthened to $1.6825 from late Monday’s $1.6795.

Commodities

Corn and soybean futures prices skyrocketed on the Chicago Board of Trade following a government report of faltering crops and a forecast for more hot, dry weather in the Midwest next week.

Wheat and oat futures also rose sharply.

On other commodity markets, livestock and meat futures were mixed; silver slipped while gold futures edged higher, and energy futures fell.

Corn futures settled 5.75 to 10 cents higher, with September at $2.4675 a bushel; soybeans were 18 to 29.50 cents higher, with August at $5.60 a bushel; wheat was 10.25 to 12 cents higher, with September at $2.8925 a bushel, and oats were 6.25 to 8.50 cents higher, with September at $1.375 a bushel.

Gold futures finished 30 to 40 cents higher, with August at $368.50 an ounce on New York’s Commodity Exchange. Silver was 6.5 to 7.4 cents lower, with July at $4.26 an ounce.

New York’s Mercantile Exchange reported that light sweet crude oil futures settled 55 cents lower with September at $21.32 a barrel.

Market Roundup, D8