Most Stocks Decline, but Dow Rises 1.12

Market Overview

Highlights of Wednesday’s market activity, compiled from Times staff and wire reports:

* Blue chips snapped a two-day losing streak and edged higher, but most stocks fell on concerns about the sluggish state of the economy and weak corporate earnings. The Dow Jones average edged up 1.12 points to 3,040.92.

* Treasury bond prices also rose, capping a recent decline, after an auction of two-year notes concluded smoothly and car makers reported poor sales.

* Oil prices fell sharply on the New York Mercantile Exchange, extending a decline that began earlier in the week.

Stocks

The 30-share Dow traded in a narrow range much of the session. A favorable sale of new two-year Treasury notes helped give the market a late boost.

Declining issues outnumbered advances 9 to 7 on the New York Stock Exchange.

Big Board volume retreated to 187.48 million shares from Tuesday’s 194.47 million.

No one was willing to jump too far into the market with the economy on such an uneven keel and plenty of third-quarter earnings to come.

“The problem is that the outlook for earnings is still suspect,” said Hugh Johnson, chief investment officer at First Albany Corp.

The latest data on the economy provided little hope for a rapid rebound that could inject life into corporations. The Federal Reserve’s beige book, a periodic look at the health of the economy by region, depicted weak or slowing growth.

Among market highlights:

* Toys R Us continued to fall, losing 3/4 to 29 as analysts at Montgomery Securities and Paine Webber cut earnings estimates. Bear Stearns removed the stock from its recommended list Tuesday.

* A number of newspaper companies posted weak third-quarter earnings and said a persistent slump in advertising revenues was to blame. Times Mirror Co. rose 1/2 to 28 5/8, but Knight Ridder fell 5/8 to 47 1/2.

* Repligen tumbled 8 3/4 to 20 1/4 after it said it was buying back from Merck the rights to monoclonal antibodies the companies were jointly developing as a potential AIDS treatment. Merck rose 1 7/8 to 132 3/8.

* Medimmune, which said it and Merck had agreed to develop monoclonal antibodies to prevent infection by the AIDS virus, soared 11 7/8 to 47.

* Hurt by a weak economy and tough competition, Compaq Computer posted a big third-quarter loss and said it will cut 1,440 jobs in a restructuring. Wall Street liked the restructuring news and pushed Compaq up 1 1/2 to 35 1/8.

Overseas, Tokyo stocks closed weaker in listless trading. The 225-share Nikkei average slipped 154.72 points to 24,799.94.

Shares closed slightly higher in London. The 100-share Financial Times index gained 1.6 points to finish at 2,561.1.

In Frankfurt, the 30-share DAX average ended 7.18 points higher at 1,587.89.

Credit

The Treasury’s bellwether 30-year bond, which lost 1/4 point Tuesday, gained 1/4 point, or about $2.50 per $1,000 in face amount. The bond’s yield slipped to 8.07% from 8.09% Tuesday.

Treasury bond prices have slid sharply in recent sessions on concern that inflation may be rising. Many economists believe that a federal tax cut, under discussion by Congress and the White House, would increase inflation.

Fixed-income securities such as bonds tend to lose value during periods of inflation.

Meanwhile, a weak report on auto sales, coupled with grim surveys from the housing and manufacturing industries, combined to paint a distressing picture of the economy, analysts said.

Bond prices generally rise on reports of economic troubles because traders expect the Federal Reserve to lower interest rates to stimulate growth.

The federal funds rate, the interest banks charge each other for overnight loans, was 5.125%, down from 5.188% Tuesday.

Currency

The dollar settled higher in trading driven largely by technical factors.

Dealers said that once the currency broke through 1.7100 German marks, there was a spinoff effect that boosted it against other currencies.

The dollar closed in New York at 1.711 marks, up from 1.700 Tuesday. It rose to 131.65 Japanese yen from 131.40. The British pound fell to $1.699 from Tuesday’s $1.709.

Commodities

Light, sweet crude oil for December delivery settled at $23.26 per barrel, down 39 cents.

The fall, following a 28-cent drop in the December contract Tuesday, prompted some traders to wonder whether they have seen the end of a monthlong rally that pushed up the per-barrel price from $22 to more than $24.

The rally was fueled partly by fears that Soviet supplies to Europe could be tight this winter. But warm weather, along with perceptions that more crude could be coming into the market, started moving prices lower.

Gold and silver futures fell on New York’s Commodity Exchange, pressured by a firm dollar and more evidence that the economy remains stalled in a recession.

October gold fell $1.60 to $362.30 an ounce; December silver fell 4.7 cents to $4.115 an ounce.

In other commodities trading, wheat rose but other grains and soybean were lower, and livestock and meat futures were mixed.

Market Roundup, D8