Dow Declines 11.08 Points as Wary Investors Await New Economic Data : Market Overview

* Stocks finished lower in subdued trading, with investors cautious ahead of key economic data. The Dow Jones industrial average fell 11.08 points to 3,384.32, ending a five-day winning streak.

* The bond rally resumed, as yields fell across the board following news that car sales slowed in late July.

Stocks

Traders said the market was overdue for a rest following five straight gains. Profit-taking hit a wide range of stocks, though winners still outpaced losers 860 to 829 on the New York Stock Exchange.

Volume remained low, at 166.74 million shares versus 164.44 million on Monday.

Stock’s recent rally was fueled by a drop in long-term interest rates, which fell as the economy slowed. Now, many investors are anxious to make sure that the slowdown doesn’t become a full-fledged recession.

The government’s report on July unemployment, due Friday, will give a good indication of the economy’s relative strength. Many investors may wait on the sidelines until then, traders said.

On Tuesday, two more reports suggested a slowing--but not free-falling--economy. The index of leading economic indicators fell 0.2% in June, the first drop in six months. Also, auto makers reported slowing sales at the end of July.

Among the market highlights:

* Auto stocks were weak on the uninspired sales report. Ford dropped 1 5/8 to 44 1/8, GM slid 3/4 to 40 1/4 and Chrysler was unchanged at 22 1/8.

* Industrial stocks in general lost ground. Eaton fell 1 5/8 to 77 7/8, Alcoa lost 1 to 71 7/8, Airgas dropped 1 1/2 to 31 3/4 and Illinois Tool Works sank 3/4 to 60 3/8.

* Monsanto, however, jumped 3 1/4 to 56 3/4. It agreed to sell its Fisher Controls unit to Emerson Electric for $1.28 billion. Investors expect Monsanto to use some of the proceeds to buy back stock. Emerson lost 1 1/8 to 50.

* Major oil stocks continued to rally, despite sliding crude oil prices. Exxon gained 3/4 to 65, Arco leaped 1 7/8 to 114 7/8 and Chevron advanced 1 to 71 5/8. Oil-issue strength helped support the Dow index.

* Health care stocks overall remained strong. Some investors have been returning to those issues recently after their selloff in the first half. Pfizer rose 1 1/2 to 80 3/4, Warner-Lambert gained 7/8 to 67 5/8, Alza added 1 3/8 to 50 3/8 and Quantum Health was up 1/2 to 25 1/4.

But U.S. Surgical tumbled 3 to 89. A Cowen & Co. analyst lowered sales estimates because of product delays, though the analyst still rated the stock a buy.

* JWP plunged 2 1/4 to 6 1/4. Internal auditors raised questions about the technical services firm’s asset valuations.

* Among Southland issues, Jack-in-the-Box parent Foodmaker plummeted 2 to 10. A Lehman Bros. analyst said the San Diego company’s interest expenses will be higher than expected in the near term, clipping earnings by a few cents a share.

Also, El Segundo-based computer distributor Merisel sank 3 1/8 to 8 after projecting little growth in the current quarter. It cited competitive pressures in Europe.

Overseas, London’s Financial Times 100-share average ended off 12.7 points at 2,407.5, while Frankfurt’s DAX average climbed 16.80 to 1,611.51.

Tokyo’s Nikkei average lost 16.86 points, closing the day at 15,692.59.

Credit

The price of the Treasury’s 30-year bond gained 10/32 point, or about $3.13 per $1,000. Its yield edged down to 7.43% from 7.45% late Monday. Yields on shorter-term bonds fell more sharply.

Bond yields were pushed down by the report showing that car sales slowed in late July, said Steven R. Ricchiuto, economist at Barclays de Zoete Wedd Securities.

The market also benefited from a report, called the Johnson Redbook, that said estimated retail sales in July rose at a lower rate than previously believed.

Reports of economic sluggishness convinced more investors that interest rates can only go lower, thus encouraging them to buy bonds to lock in current yields.

Today, the market will contend with the Treasury’s announcement of its quarterly refunding, scheduled for next week. The Treasury will detail the quantity of 3-, 10- and 30-year securities it will auction next week.

The federal funds rate, the interest on overnight loans between banks, was quoted at 3.188%, unchanged from late Monday.

Currency

The dollar rose slightly against major currencies in slow domestic dealings that reflected a dearth of economic news to trade on.

“It was a real yawner,” Jay Wertheimer, senior foreign currency trader for the New York branch of Banco di Sicilia, said about dollar trading. “The markets were very thin, very dead.”

In New York the dollar closed at 1.477 German marks, up from Monday’s 1.475. It also rose to 127.25 Japanese yen, up from 127.20.

Commodities

Oil prices dropped as traders turned from tension between the United States and Iraq to worry instead about slow demand for oil products in the recession-hit Western economies.

September crude oil lost 23 cents to close at $21.35 a barrel on the New York Mercantile Exchange.

The price could fall more steeply today: After the close of trading Tuesday, the American Petroleum Institute reported a rise in U.S. oil inventories that far surpassed analysts’ expectations.

The API, in its weekly statistical summary, said domestic oil stocks jumped 6.3 million barrels to 330.2 million barrels in the week ended July 31. That was well above analysts’ estimates of a 1-million- to 2-million-barrel buildup.

Elsewhere, August gold futures added 10 cents to $352.70 an ounce, and September silver slipped 0.5 of a cent to $3.88 on New York’s Comex, stabilizing after Monday’s slide.