STOCKS : Rate Rise Halts Stocks’ Climb; Dow Slips 7.15

A blip up in interest rates helped send stock prices into retreat Thursday, ending three consecutive advancing sessions. But most investors appeared to be waiting for today’s July unemployment report before making major moves.

The Dow Jones average of 30 industrials, up 52.32 points from Monday through Wednesday, slipped 7.15 points to 3,017.67.

Declining issues outnumbered advances by about 4 to 3 on the New York Stock Exchange, and Big Board volume came to an estimated 170.61 million shares as of 5 p.m. EDT, against 167.31 million Wednesday.

The slight reversal in long-term interest rates after Wednesday’s decline came as government figures showed a drop of 21,000 in initial claims for state unemployment insurance in the week that ended July 20.

The figures suggested stronger-than-expected conditions in the job market, which is closely watched on Wall Street for evidence of the state of the economy.

Another positive sign for the economy was the monthly survey of corporate purchasing managers, whose index posted a strong gain.

Wall Street wants to see renewed economic growth, but not so fast that it causes inflation to rise, and with it interest rates. So a key test for both stock and bond markets will be today’s government report on July unemployment. If the number of people employed in July shows too strong a gain, bond yields could jump and stocks could suffer another setback.

Still, a recovering economy will ultimately be good for corporate profits, and at some point the market is likely to look more at profits than at interest rates, experts say.

Among the market highlights:

* Technology stocks seemed buoyed by better economic news. Apple Computer rose 2 7/8 to 49 1/8, Intel jumped 2 5/8 to 49 5/8, Sun Microsystems added 2 to 32 5/8, Quarterdeck was up 1 to 18 1/2, and Datron Systems rose 3/4 to 15 1/4.

L.A.-based software firm Logicon gained 1 1/4 to 27 1/4 on a healthy earnings report.

* Many medical stocks continued their recent advance. Biogen rose 1 7/8 to 30, Centocor added 1 3/4 to 36, United Healthcare gained 1 3/4 to 52, and U.S. Healthcare jumped 2 1/8 to 32 3/4.

* The market’s weakness was centered on aerospace and industrial companies. Boeing fell 1 1/8 to 45 1/4, Northrop lost 3/4 to 29, and Reynolds Metals fell 1 3/8 to 59 7/8.

* American Express rose 1 to 26 3/8. The company said famed investor Warren Buffett’s Berkshire Hathaway Co. will invest $300 million in the company by buying convertible preferred stock. American Express said the proceeds will strengthen its balance sheet.

* Columbia Gas, the volume leader among Big Board issues, climbed 2 to 16. The stock fell 3 points Wednesday as Columbia and its principal pipeline subsidiary sought Chapter 11 protection under the federal bankruptcy laws.

Separately, Dow Jones & Co. said Columbia would be bumped from the roster of stocks in its average of 15 utility stocks, effective Monday, to be replaced by Arkla. Arkla was flat at 17.

* Time Warner rose 1 to 85 3/4. Paine Webber recommended the stock.

* Leslie’s Poolmart, a retailer of pool supplies in California and the West, plunged 2 3/8 to 7 5/8 on a disappointing profit report.

Overseas stocks had a lackluster day. In Tokyo, the 225-share Nikkei average fell 48.02 points to 24,072.73. In London, the 100-share Financial Times index edged up 2.9 points to 2,591.7. In Frankfurt, the 30-share DAX index was 0.25 points higher at 1,622.56.

Credit

Treasury bond prices closed lower after a sharp decline in unemployment claims and expectations that the July jobless report to be released today will show a stable economy.

The Treasury’s bellwether 30-year bond fell 7/32 point, or $2.19 per $1,000 in face amount. Its yield rose to 8.35% from 8.33% late Wednesday. Prices of short-term securities were slightly higher.

Economists said bond prices dropped after a Labor Department report showed fewer people filing unemployment claims.

The bond market was hurt as traders took trading positions in advance of the July unemployment report, due today. Some economists believe the nation’s jobless rate will remain flat or decline slightly from June’s rate of 6.9%.

A lower rate would hurt the bond market because it would be a sign of economic growth, which lessens the likelihood the Federal Reserve will lower interest rates.

Late in the day, 30-year bond gained slightly after release of money supply figures. The Federal Reserve said the two broadest measures of the nation’s money supply fell in the week ended July 22. The measure known as M2 fell $5.5 billion to $3,385.2 billion from the previous week.

Economists had expected the money supply to grow, and the decline was seen as evidence the recovery was running out of steam. The 30-year bond price turned lower late in the session as concerns returned about the employment report.

The federal funds rate, the interest on overnight loans between banks, was quoted at 5 13/16%, down from 5 7/8% late Wednesday.

Currency

The dollar settled mostly higher in active trading.

Traders said there was minimal reaction to an important survey of corporate purchasing managers, which indicated that the economy grew for the second straight month in July, or to several other economic reports.

“Most of today’s activity was contained in a 1 1/2-hour period of trading,” said David Factor, a dealer for Fuji Bank in New York, referring to a busy morning session after the data came out.

The dollar settled at 137.55 yen in New York, up from 137.36 Wednesday. It rose to 1.757 German marks from 1.744.

Commodities

Prices of soybean futures soared to a nine-month high on the Chicago Board of Trade amid fading hopes for drought-breaking rain in the Midwest.

Corn and soybeans already have been hurt by hot, dry conditions, and more dry weather can cut production further, analysts said.

“After Monday, any rain we see won’t do the crop any good,” said one grain trader.

On other commodity markets, cotton futures rose; oil futures fell; precious metals retreated, and livestock and meat futures were mixed.

Soybeans for August delivery, which are exempt from the exchange’s 30-cent daily price limit, rose 31 cents to $6.14 a bushel, the highest settlement of a near-month soybean contract since Oct. 23. Other soybean contracts finished 11 to 28 1/4 cents above Wednesday’s final prices.

Corn futures finished 2 1/2 to 5 3/4 cents higher, with September at $2.62 1/2 a bushel, the highest level in more than a year; wheat futures settled 2 3/4 cents lower to 1 1/2 cents higher, with September at $2.95 1/2 a bushel; oats were 2 1/2 to 3 1/4 cents higher, with September at $1.33 1/2 a bushel.

Soybean futures climbed steadily as private meteorologists took rain out of their Midwest forecasts, feeding skepticism about Wednesday’s National Weather Service outlook for normal precipitation in the region next week.

Light sweet crude oil futures settled 31 to 45 cents lower on the New York Mercantile Exchange, with September at $21.27 a barrel.

Gold was unchanged to 50 cents lower on New York’s Commodity Exchange, with August at $363.20 an ounce. Silver was 2.5 to 2.6 cents lower, with September at $4.053 an ounce.