Dow Falls 7.26 as Buyers Await Report on Jobs : Market Overview

* Stocks pulled back a bit, still wavering uncertainly around the 3,400 level of the Dow Jones industrial average in advance of today’s May employment report. The Dow, up 10.89 points Wednesday, fell 7.26 points to 3,399.73. Bonds and the dollar were largely flat.

* European stock markets stabilized after Wednesday’s tumble related to Denmark’s “no” vote on European unity.

Stocks

Most investors were happy to move to the sidelines before today’s release of employment data, which should give a better indication of the strength of the rebound from recession.

Declining issues outnumbered advances by 5 to 4 on the New York Stock Exchange. Big Board volume came to 204.46 million shares against Wednesday’s 215.79 million.

Auto stocks, however, continued to surge as Wall Street viewed strong May car sales as a sure sign of the industry’s recovery.

In advance of the May employment report, the Labor Department reported that initial claims for state unemployment insurance rose 4,000 in the week ended May 23, slightly exceeding analysts’ estimates.

If Wall Street estimates are accurate, the unemployment rate for May will show no change from April’s 7.2%.

The stock market would probably be happy to see that, traders say, because a slow recovery would keep pressure off inflation and interest rates.

If today’s report shows surprising strength in employment it could reignite inflation worries, potentially sending stocks lower.

* The rally in auto stocks continued, led by GM, which surged 1 7/8 to 43 5/8. It was the biggest gainer in the Dow average. Also, Ford added 1 3/8 to 48 1/8, and Chrysler gained 3/4 to 20 5/8, all in active trading.

* Industrial metals stocks also were strong. An analyst at the brokerage First Boston reaffirmed buy ratings on many of the stocks, including Reynolds Metals and Amax, citing increasing demand for metals. Reynolds rose 1/2 to 63 7/8, and Amax added 1/2 to 22 5/8. Other metals winners included Bethlehem Steel, up 5/8 to 14 5/8; Inland Steel, up 1 to 24; Phelps Dodge, up 1 1/2 to 95 3/4, and Inco, up 1 1/2 to 32 1/2.

* Profit taking hit some other industrials. Monsanto fell 2 1/2 to 60 1/4 after Kidder Peabody downgraded the stock to hold from buy. ITT fell 1 1/2 to 63 3/8 after Goldman Sachs cut 1992 estimated earnings to $4.20 a share from $5.10, because of L.A. riot-related losses expected at ITT’s Hartford Insurance unit. But Goldman still rates ITT a buy.

* Disney tumbled 1 7/8 to 37 1/4 after its Euro Disney unit issued a disappointing profit report and a cautious outlook about earnings for the rest of this year.

* Retailers were mixed, mostly paralleling their May sales reports. Wal-Mart rose 3/4 to 55 1/8, and Dayton-Hudson gained 1 to 69, but Ann Taylor tumbled 1 3/4 to 22 7/8, and Filene’s Basement sank 2 3/4 to 17.

* Biotech firm Xoma, the volume leader on the NASDAQ market, plunged 4 3/4 to 15 1/4. The company said the FDA may want additional tests on its E5 antibody.

* McDonnell Douglas, which has plummeted in recent weeks, rebounded 4 3/8 to 43 1/2 after hinting it may buy back some stock. Also, an analyst at Lehman Bros. upgraded the stock to a speculative buy, citing its recent pullback.

* El Segundo-based magnetics research firm Aura Systems added 3/8 to 5 after falling 1 on Wednesday. A Times story on Wednesday said the Securities and Exchange Commission is investigating trading in Aura’s stock. Thursday, Aura said it “requested that the SEC investigate recent trading patterns to determine if there has been any manipulation.”

* Two stocks are likely to be hurt today by announcements made after the close Thursday. Reebok, off 1 3/4 to 26, said second-quarter earnings will be in the 48-cent to 53-cent-a-share range, down from 64 cents a year ago. The firm blamed slower sales and higher costs.

Also, Dole Food, unchanged at 30 1/2, said that second-quarter earnings will be about 25% below a year ago and that “softness in operating earnings could continue throughout 1992.”

In overseas trading, positive German economic data and good corporate news outweighed lingering worries about prospects for European union, despite Denmark’s rejection of the new European union treaty Tuesday. Frankfurt’s 30-share DAX index added 3.73 points to 1,792.31 after losing 12.81 points Wednesday.

In London, the Financial Times 100-share average added 1 point to 2,681.9 after losing 25 points the previous session.

In Tokyo, the Nikkei average ended under 18,000 for the first time in a week. It finished down 224.61 points at 17,964.07.

Credit

The price of the Treasury’s bellwether 30-year bond eased 1/16 point, or 63 cents per $1,000, and the yield held steady at 7.87%. Bond traders showed no interest in major buying or selling in advance of today’s May employment report.

A report that American businesses plan to boost new plant and equipment spending by 4.7% this year failed to stir inflation worries.

The federal funds rate, the interest on overnight loans between banks, was 3.688%, down from 3.75% Wednesday.

Commodities

Oil prices mostly held their gains in uneventful trading.

Light, sweet crude for delivery in July, which rose 32 cents Wednesday, added another 5 cents to settle at $22.48 per barrel on the New York Mercantile Exchange, a high for the year.

The market continued to draw support from indications that Saudi Arabia is interested in higher prices, an about-face for the world’s biggest petroleum exporter.

Meanwhile, profit taking from sharp gains earlier in the week sent platinum futures down more than $5 an ounce before the losses were trimmed. The July platinum contract on the New York Merc settled $2 lower at $373 an ounce.

On New York’s Comex, gold for June eased 10 cents to $338.60 an ounce; June silver added 1.7 cents to $4.08.

Currency

The dollar settled mixed on world currency markets after trading in narrow ranges, as traders awaited the release of May unemployment data.

In New York, it fell to 127.40 Japanese yen from 127.45 Wednesday. It dropped to 1.598 German marks from 1.604.