Dow Up 5.81 on Hopes of Cut in Interest Rates : Market Overview

* Blue chip stocks eked out small gains in a nervous session, as traders again waited for the Federal Reserve to ease interest rates. The Dow Jones industrials inched up 5.81 points to 2,908.09.

* Platinum continued to slide on fears of a deep global economic slump.

Stocks

Worries about the economy continued to dominate Wall Street.

On the down side, computer giant Digital Equipment Corp. unnerved traders early in the day with a forecast of a loss in the current quarter. The company cited weak demand for its products.

Digital’s news helped pull the market down in the first half hour of trading, with the Dow index losing about 20 points.

As trading progressed, the market rallied on renewed expectations that the Fed will soon cut interest rates.

Optimism about rates was fanned by testimony that Fed Chairman Alan Greenspan gave on Capitol Hill. He acknowledged that the economy “clearly has faltered” and seemed to indicate in his speech that the Fed saw room to lower interest rates further.

“Greenspan telegraphed that the Fed’s intention is to continue to be accommodative, and that’s in part what drove the market back,” said analyst Eugene Peroni of Janney Montgomery Scott.

Still, losers outnumbered winners 891 to 740 on the New York Stock Exchange, where trading totaled 196.46 million shares, up from Tuesday’s 191.73 million.

Despite the Fed chairman’s comments, “there’s just no great demand for stocks, no urgency to commit more money,” said Michael Metz, strategist at Oppenheimer & Co. “The market’s really dominated by short-term traders and portfolio realignments. There’s not really any investment interest.”

Among the market highlights:

* Digital Equipment slumped 4 3/4 to 51 3/4 on its loss forecast. The news failed to slam most other tech stocks, many of which were targets of bargain hunters. IBM gained 3/4 to 86 1/4, Apple Computer rose 1 1/4 to 51 3/4 and Adobe Systems added 2 to 56 1/2.

One conspicuous loser was Irvine-based personal computer maker AST Research. It lost 1 1/4 to 15 7/8, just above its 1991 low of 15.

* General Motors, which said it will idle 21 plants and cut its work force by 74,000 in the next few years, ended down 1/8 at 27 3/4. The news was expected. However, rival Chrysler lost 1/2 to 10, just above its 1991 low of 9 3/4.

* Among bank stocks, L.A.-based First Interstate jumped 1 3/8 to 28 1/4 on renewed buyout speculation. Meanwhile, ailing giant Citicorp fell again, losing 1/4 to 9 1/8.

* Some retail issues weakened further on Christmas sales fears. Pic ‘N’ Save lost 1 7/8 to 20 5/8, Price Co. dropped 3 to 48 1/2, and Dillard Department Stores gave up 3 7/8 to 114 3/8.

Also, Tiffany slid 1 1/8 to 43 7/8. Merrill Lynch downgraded the stock to neutral.

* Delta Woodside Industries plummeted 7 3/4 to 15 7/8. The textile and apparel maker said a slowdown in orders will hurt earnings in the current quarter.

* Bet Holdings, parent of Black Entertainment Television, plunged 3 to 15 7/8 after dropping a total of 4 3/4 Monday and Tuesday. The company, a recent new issue, released a disappointing quarterly earnings report Monday. In addition, it disclosed that its advertising base has shrunk below previous estimates.

* Among Southland issues: Troubled Pacific Enterprises, parent of Southern California Gas and Thrifty Drug stores, lost 3/8 to a new 1991 low of 23 1/2; highway builder Kasler rose 3/8 to 12, continuing to gain on optimism about new federal road funding; Hilton Hotels jumped 1 5/8 to 36 1/4, although there was no news.

Oxnard-based Benton Oil inched up 1/8 to 10 1/8. The firm postponed a secondary stock offering, citing weak market conditions.

Overseas, London’s Financial Times 100-share average dropped 19.3 points to 2,413.6. In Frankfurt, the DAX average climbed 12.82 points to 1,573.75. Tokyo stocks drifted in listless trading. The Nikkei average lost 106.39 points to 22,629.90.

Credit

Bond yields inched up in quiet trading, as the Federal Reserve hinted at lower interest rates but again failed to act.

The Fed, whose policy-making Open Market Committee ended a two-day meeting, did not lower its key discount rate, as many experts had expected. Yet on Capitol Hill, Chairman Greenspan was all but admitting that the Fed will need to lower rates again soon to help the economy.

Many bond traders remain convinced that it will only be a matter of time. Even so, some sold bonds Wednesday, sending yields slightly higher. The yield on the Treasury’s 30-year bond was 7.75%, up from 7.74% Tuesday.

The federal funds rate, the interest banks charge each other on overnight loans, stood at 4.25%, down from 4.375% Tuesday.

Currency

The dollar initially declined as traders sold in anticipation that the Federal Reserve would move swiftly to cut interest rates.

But when a rate cut failed to materialize, some currency traders turned more bullish on the dollar. If U.S. interest rates stay up, that makes U.S. bonds more attractive and thus boosts the dollar relative to other currencies.

Traders were also awaiting a press briefing scheduled for today by Germany’s Bundesbank. If the German central bank announces an interest rate hike, it could have a negative impact on the dollar by making German bonds more attractive.

Some speculate that both the Fed and the Bundesbank are likely to wait till next year before taking further action on rates.

In New York, the dollar ended at 1.572 German marks, up from 1.570 Tuesday. It settled at 128.35 Japanese yen, up from 128.29 Tuesday.

Other dollar rates in New York, compared to Tuesday’s rates, included: 1.393 Swiss francs, up from 1.389; 5.370 French francs, up from 5.364; 1,187.00 Italian lire, unchanged, and 1.147 Canadian dollars, up from 1.146.

Commodities

Continuing economic worries weighed on platinum, which is used heavily in industry. If the world economy slows further, industrial use of the metal could plummet.

January platinum futures dropped $4.90 to $342.90 an ounce on the New York Merc after slumping $9.30 Tuesday. On New York’s Comex, December silver lost 0.1 cent to $3.83 an ounce. But December gold rose $1.70 to $359 an ounce.

Elsewhere, livestock analysts predicted lower cattle futures prices ahead after a government report indicated a backlog of market-ready cattle on feedlots.

Live cattle for December delivery slipped 0.15 cent to 70.55 cents a pound as traders liquidated positions ahead of the contract’s expiration today.

Meanwhile, heating fuels led energy futures lower on the New York Merc. Heating oil opened lower after an industry report Tuesday showed a nearly 1-million-barrel increase in U.S. supplies. The supplies had already swollen as a result of unusually warm winter weather in the eastern United States.

Light, sweet crude oil for January fell 6 cents to $19.39 a barrel, while January heating oil plunged 1.11 cents to 54.72 cents a gallon.

Market Roundup, D12