STOCKS : Market Inches Up 5.14 on Busy Day for Banks

Stocks edged higher Monday in a sluggish session punctuated only by a flurry of activity in banks.

The Dow Jones industrials inched up 5.14 points to 3,001.34.

The broader market was a bit stronger, though advancing issues just slightly outnumbered losers, 760 to 753, on the New York Stock Exchange. Volume remained light at 145.61 million shares, typical for a slow summer Monday.

News of a merger between BankAmerica and Security Pacific whipped up a buying frenzy in banking stocks but failed to jog most of Wall Street out of its summer lethargy.

“If not for the bank activity, we’d have no activity,” remarked one trader. Stocks were lower for most of the day until a late spate of buying nudged the Dow over the psychologically key 3,000 mark.

The proposed bank deal would be the third in a month to combine giants in the industry, which is consolidating in the face of mounting problem loans and growing global competition.

“Now, speculation grows on who will be next. Other banks have gotten a recharging of interest,” said Marshall Acuff, strategist at Smith Barney, Harris Upham.

The problem for the broader market, however, is continuing uncertainty about the economy. “No one is sure which way the economy is going. One day you read the paper and it looks good, and the next day you get disappointing figures,” said analyst David Mills at Boston Co.

Among the market highlights:

* News of the BankAmerica-Security Pacific deal sent their stocks sharply higher, and also boosted shares of many other California financial institutions. (See box.)

Among banks outside California that were boosted on renewed merger talk, Chase Manhattan rose 1 3/4 to 21 1/8, Citicorp rose 1 to 14 3/4, Bank of New York added 2 1/4 to 35, Comerica jumped 2 to 44, and Barnett Banks gained 1 1/2 to 34.

* Brokerage Salomon Inc. plunged 3 1/8 to 31 5/8 in the wake of disclosure Friday that the firm broke the rules at several recent government debt auctions and is being investigated by the Treasury.

* Arco tumbled 3 3/8 to 116. Dean Witter cut earnings estimates for the company. Also falling was Unocal, off 1 1/4 to 24 1/4.

* Most HMO stocks stabilized after Friday’s selloff on competitive worries. FHP International rebounded 3/4 to 21 1/4, and Maxicare gained 1/4 to 9. But PacifiCare lost 1/2 to 31 3/4.

* New Line Cinema gained 5/8 to 11. Donaldson Lufkin & Jenrette initiated coverage of the movie company with a “buy” rating.

* Among Southland issues, computer firm AST Research surged 1 5/8 to 29 1/2 as tech stocks in general rose strongly. But retailer Leslie’s Poolmart slumped 1 to 5 7/8, a new low, continuing to react to disappointing earnings.

Foreign markets closed mostly lower. In Tokyo, the Nikkei average dropped 448.95 points to 22,985.67. In London, the Financial Times 100-share index eased 1.2 points to 2,569.4. Frankfurt, Germany’s blue chip DAX 30 index ended down 6.15 points at 1,626.06.

Credit

Bond yields eased in a quiet session as traders continued to digest last week’s record Treasury bond auction.

The Treasury’s 30-year bond rose 1/8 point, or $1.25 per $1,000. Its yield slipped to 8.23% from 8.24% Friday.

Steven R. Ricchiuto, economist at Barclays de Zoete Wedd Securities, said the market continued to be concerned by Friday’s report that brokerage Salomon Inc. had uncovered irregularities and rule violations in its bids at certain Treasury auctions.

Some investors fear that Salomon will have to unload some of its large government bond holdings as a result, but market-watchers said there has been no sign so far it has taken such a step.

The federal funds rate, the interest on overnight loans between banks, was 5.563%, up from 5.375% late Friday.

Currency

The dollar finished mixed against major currencies in light trading, as traders continued to posture before an expected rise in German interest rates this week.

The dollar ended at 1.725 German marks in New York, compared to 1.729 Friday. The dollar also finished at 136.55 Japanese yen, unchanged.

Germany’s central bank council meets Thursday and is expected to boost German rates to fight inflation. That should hurt the dollar.

Commodities

Gold and silver drifted lower in light profit taking on New York’s Comex. August gold fell 90 cents to $357.50 an ounce; September silver dropped a penny to $3.97.

Light, sweet crude oil for September delivery settled at $21.69 a barrel, up 7 cents from late Friday on the New York Merc.

Market Roundup, D12