Dow Index Falls 10.73 as Fed Action Awaited

Market Overview

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

* Stocks pulled back as investors pared positions while waiting to see if the Federal Reserve will lower interest rates further.

* The Dow Jones industrial average fell 10.73 points to 3,045.62.

* The dollar’s value also slid amid pessimism about the U.S. economy and interest rates. Meanwhile, bonds were flat.

Stocks

On the New York Stock Exchange, declining issues outnumbered advances by about 3 to 2. Trading slowed from the active pace of last week. Big Board volume came to 155.66 million shares, down from 206.48 million Friday.

“It looks like the market is reacting to what the Fed is not doing,” said Robert Stovall, president of Stovall/21st Advisers.

Anticipation of another cut in interest rates has mounted since Friday, when fresh economic data showed a troubled recovery. The government said the unemployment rate rose to 6.8% in October and that its main economic forecasting gauge slipped in September for the first time in eight months.

Analysts said a cut in the Federal Reserve’s benchmark discount rate could come today after a meeting of its policy-setting committee. “If we don’t get it (today), we could see more selling,” said Robert Walberg, an MMS International analyst.

The Fed last lowered its discount rate on Sept. 13 to 5% from 5.5%.

“I think the market could pull back day by day until something happens,” said Steve Poling, executive vice president at AMEV Advisors Inc. “It will be difficult to make headway. The market definitely expects a cut (in rates).”

Among the market highlights:

* Technology stocks were big losers. Compaq slid 1 1/4 to 26 5/8 on reports that more executives had departed. Less than two weeks ago, Compaq dismissed its co-founder.

Software firm Autodesk sank 4 1/4 to 37 3/4. Dean Witter cut earnings estimates and its rating on the company, while Prudential lowered its estimates.

Other tech losers included Digital Equipment, down 2 to 59 7/8; Apple, off 1 1/4 to 49 3/4, and Irvine-based Advanced Logic Research, which dropped 1 1/4 to 11 1/2 after cutting prices on its personal computers.

* California bank and S&L; stocks dropped on worries about the state’s ailing economy. Wells Fargo lost 2 1/4 to 64 5/8, BankAmerica fell 1 3/8 to 40, and Great Western Financial slipped 1/2 to 15 3/4.

* Los Angeles-based auto insurer Mercury General jumped 1 1/2 to 29 1/2 after reporting quarterly earnings up 38%.

* Retailers continued to weaken on concerns about consumer spending. Discount retailer 50%-Off Stores fell 1 1/2 to 18 1/4 after reporting that same-store sales rose just 5% in October. The chain had been wildly popular with investors last summer, and the stock recently reached 27 1/2.

* Pepsico gained 5/8 to 29 3/8. Its options volume soared on speculation that it is a takeover target of Philip Morris, which lost 5/8 to 68 5/8. Analysts discounted the rumors.

* Oil stocks rose as cold weather boosted prospects for higher energy prices. Exxon rose 1 1/8 to 61 5/8, Chevron gained 1 3/8 to 75 1/4, and Unocal rose 5/8 to 26 3/8.

* Salomon jumped 1 7/8 to 29 5/8. Traders said Sanford C. Bernstein upgraded its rating to buy from hold for the brokerage house.

Overseas, shares closed down in London. The Financial Times 100-share average dropped by 21.7 points to 2,527.8.

German shares ended a dull trading session mixed. In Frankfurt, the DAX average fell 3.34 points to 1,570.21.

In Mexico City, stocks hit a new high, with the Bolsa index rising 11.36 points to 1,382.37.

In Tokyo, the stock market was closed for a national holiday.

Credit

The price of the Treasury’s bellwether 30-year bond slipped 5/32 point, or $1.56 per $1,000 in face amount. Its yield inched up to 7.94% from 7.93% Friday.

There were no new economic reports during the session to push bond prices in either direction.

Samuel Kahan, chief economist for Fuji Securities in Chicago, said yields of shorter-term securities remained steady in the session because of expectations that the Fed will cut interest rates soon.

Many economists expect the Fed to lower the federal funds rate to 4.75% and cut the discount rate one-half point to 4.5%.

The federal funds rate, the interest on overnight loans between banks, held at 5%, the same level as late Friday.

Currency

Analysts said the dollar picked up where it left off last week--declining as currency traders also anticipated that the Fed would be forced to lower interest rates to stimulate the flagging economy.

A batch of negative economic reports--including an increase in the unemployment rate--has hurt the U.S. currency. The dollar, like other currencies, draws support from stable or higher interest rates, so the prospect of a drop undermines its strength.

Some overseas brokers say the dollar could fall as low as 1.585 German marks in the coming weeks. The U.S. currency fell in New York to 1.639 marks Monday, down from 1.645 late Friday.

The dollar also fell to 129.185 Japanese yen in New York from Friday’s 129.73 yen.

Commodities

Bitterly cold weather helped lift orange juice and heating oil futures prices Monday, although there was little chance of frost in the Florida Citrus Belt.

Frozen concentrated orange juice for November delivery settled at $1.682 a pound on the New York Cotton Exchange, up 1.25 cents from Friday. The more heavily traded January contract rose 1.85 cents to $1.730.

On the New York Merc, December heating oil deliveries rose 1 cent to 71.68 cents a gallon.

Both markets were partly supported by record cold temperatures in much of the country and forecasts for more unseasonably frigid weather this week in the East.

Meanwhile, crude oil ended slightly lower after a late selloff. Light, sweet crude oil for December slipped 2 cents to $23.80 a barrel.

Market Roundup, D14