STOCKS : Dow Dips 4.47; T-Bond Yields Fall Below 8%

Stocks closed mixed Monday in the second-slowest trading session of the year, while the bond market rally continued.

The Dow Jones industrial average, off 31.97 points last week, drifted in a narrow band and closed down 4.47 points to 3,007.16.

Losers narrowly outpaced gainers 793 to 731 on the New York Stock Exchange, as volume was slowed by observance of the Jewish New Year holiday. Turnover was 109.25 million shares, lightest since 69.8 million July 5.

Investors continue to churn the market, unsure of whether to bet on another cut in interest rates soon by the Federal Reserve. Friday, a government report on August employment showed anemic economic growth, but many analysts aren’t sure the Fed is convinced that another rate cut is needed to keep the recovery going.

The bond market, however, continued to rally as investors rushed to lock in yields, figuring the Fed will have to cut rates eventually.

Among the market highlights:

* Despite the Dow’s waffling, the NASDAQ composite index of smaller stocks continued to advance. The index rose 1.13 points to 518.07, pulled higher by a rally in some tech and biotech stocks. Apple gained 1 3/4 to 53 1/4, AST Research rose 5/8 to 31, and Santa Monica-based software firm Quarterdeck jumped 1 1/8 to 20 3/4.

Biotech giant Amgen was up 5 1/4 to 163. The stock will split three-for-one today.

* Within the Dow, IBM and Merck rose sharply. IBM added 1 5/8 to 101 in advance of its new mainframe computer announcement this week. Drug firm Merck jumped 2 3/8 to 129 1/2. There was no specific news.

* Phillips Petroleum rose 1 1/8 to 27 1/2. The company said it is looking to increase cash flow with the possible sale of $500 million or more in assets by the end of 1993.

* Baxter International dropped 1 1/4 to 33 1/2 on news that the government is investigating questionable payments made to doctors by Baxter’s home health-care unit.

* U.S. Healthcare fell 2 1/8 to 22 1/4. Traders said brokerage Alex. Brown cut its earnings estimates for the HMO firm. Other HMO stocks also continued to weaken.

* Supermarket companies with Southern California stores were hit by renewed worries of price wars in the region. A story in The Times on Sunday noted that a new competitor, Smith’s Food & Drug, is about to enter the area and that some analysts fear increasing pricing pressures. Smith’s lost 1/2 to 38 5/8. American Stores, owner of the Lucky chain, fell 7/8 to 39 1/8, Vons dropped 7/8 to 26 7/8, and Albertson’s fell 5/8 to 41 3/8.

* El Monte-based electronics distributor Marshall Industries eased 1/4 to 24 1/4. It said earnings in the quarter just ended were in the 46 cents to 48 cents a share range, down from 58 cents a year ago.

Overseas, in Tokyo the 225-share Nikkei average closed down 118.62 points to 22,573.98.

Frankfurt’s DAX average ended 13.12 points lower at 1,633.06. London’s Financial Times 100-share average fell 14.2 points to 2,653.2.

Credit

Yields on long-term Treasury bonds finished below 8% for the first time in seven months as expectations grew that the Federal Reserve will ease interest rates.

The 30-year T-bond yield closed at 7.99%, down from 8.01% late Friday. The yield was last below 8% on Feb. 19, when it also closed at 7.99%.

Investors have been pouring into bonds in recent months, convinced that the Fed will push rates still lower to help the weak economy.

The latest impetus for bond buying was a government report Friday that the nation’s unemployment rate held at 6.8% in August. That was a weaker than expected performance and a negative sign for recovery.

The federal funds rate, the interest on overnight loans between banks, was quoted at 5.50%, up from 5.438% late Friday.

Currency

The dollar fell against the German mark and other major currencies amid expectations of a cut in U.S. interest rates.

The selloff began Friday with the August employment report.

Traders said the selling was picking up steam. “The trend seems to be more important than any of the (economic) fundamentals,” said Robert Ryan, senior trader for Bank of New York.

The dollar fell more than 2 pfennigs in the session to close in New York at 1.694 German marks, down from 1.717 marks Friday.

It also closed at 134.625 Japanese yen, down from 135.65 Friday.

Commodities

An extended dry spell in parts of Latin America sent coffee futures prices sharply higher on the Coffee, Sugar & Cocoa Exchange.

Next season’s coffee crop could be severely threatened unless it gets a lot more rain this month or next, analysts said.

The rally in coffee continues a run-up that began a few weeks ago with the announcement that Brazil and Colombia were seeking support for a plan to withhold 10% of the crop from the market.

The December coffee contract settled 2.55 cents higher at 93.55 cents a pound.

Elsewhere, light, sweet crude oil for October settled at $21.33 per barrel, down 24 cents at the New York Merc. It was oil’s fifth-straight decline.

At the Comex, gold for delivery in December settled $1.80 higher at $355.20 an ounce; December silver was 7.2 cents higher at $4.10.

Market Roundup, D10