Dow Loses 2.17 as Investors Sit on Sidelines : Market Overview

* The stock market ended mostly lower in sluggish trading as many investors sat on the sidelines ahead of President Bush’s speech at the Republican National Convention. The Dow Jones average of 30 industrials fell 2.17 points to 3,304.89.

* The dollar moved closer to its all-time low against the German mark in what traders called a further sign of pessimism about the U.S. economy.

* Silver futures plunged to new lows on New York’s Commodity Exchange on reports of massive Middle East and Swiss-based selling.

Stocks

In addition to being concerned about Bush’s acceptance speech, market participants were also concerned about third-quarter corporate earnings, traders said. Several companies or company analysts have recently lowered profit expectations.

The caution translated into declining issues outnumbering advances by 5 to 4 on the New York Stock Exchange.

Volume on the floor of the Big Board came to 183.40 million shares, down from 186.71 million the previous session.

Investors were waiting to see what Bush would say in Houston about the economy and whether his acceptance speech would boost his standing in the polls, traders said. Wall Street tends to favor Republican administrations.

“The President’s speech will be the defining event in terms of developing investor expectations,” said William Dodge, chief investment strategist with Dean Witter Reynolds Inc.

Summer doldrums also played a part in the market’s sluggishness, Dodge said. Many traders take vacations in August, reducing the number of market players.

A number of dealers expressed confidence in the market, however.

“It bends but it doesn’t break,” said Alfred Goldman, director of technical market analysis at A. G. Edwards & Sons Inc. “It’s a middle-aged bull market that has to catch its breath, which it has been doing for the past 2 1/2 weeks.”

Early in the day, the market received impetus from gains overnight in Tokyo, where stocks rose 4.21%.

Investors appeared to ignore the government’s report on initial jobless claims, which soared by 71,000 in the week ended Aug. 8 to 474,000. Although it was the largest weekly increase in more than 10 years, the report was within forecasts by private economists. It reflected a second round of filings from a two-week, companywide General Motors shutdown in late July.

Among market highlights:

* Bank stocks, which pulled down the market Wednesday, recouped some of their losses.

Citicorp was the most active issue on the NYSE, rising 5/8 to 17 3/8 after an analyst raised its rating to above average from neutral --in part because of the stock’s low price. Chemical Bank rose 7/8 to 33 5/8, BankAmerica 3/8 to 43 5/8 and Chase Manhattan 1 1/4 to 23 7/8.

* Bristol-Myers Squibb fell 2 1/8 to 66 7/8 in active trading. Smith Barney, Harris Upham & Co. lowered third-quarter earnings estimates and reduced an investment rating on the stock.

* Telefonos de Mexico fell 7/8 to 45 3/8 in the wake of a decline in the Mexican stock market. High Mexican interest rates and evidence of weaker economic growth have accelerated a summer-long slide in Mexican stocks, nearly wiping out the market’s dramatic gains in the first half of 1992. After losing ground for the past five sessions, the bolsa’s 40-share index dropped 35.10 points, or 2.38%, to close at 1,439.03 on Thursday. The index has lost more than 450 points since peaking at an all-time high of 1,907.36 on June 1.

* Navistar was unchanged at 1 7/8 after saying that it expects poor fourth-quarter earnings.

* Computer maker Novell Inc. was the most actively traded NASDAQ issue, falling 1 7/8 to 47 1/4 after an analyst reduced the company’s short-term rating.

Overseas, German shares closed near their 1992 low on worries about Commerbank’s exposure to troubled Danish insurer Hafnia. Frankfurt’s 30-share DAX index dipped 11.66 points to 1,513.06.

In London, the 100-share Financial Times index eased 4.1 points to 2,359.4.

Credit

Bond prices finished slightly lower ahead of President Bush’s acceptance speech at the Republican convention.

The price of the Treasury’s main 30-year bond fell 1/16 point, or 63 cents per $1,000 in face amount. Its yield, which rises when prices fall, rose to 7.32% from 7.31% Wednesday.

Market participants were concerned that Bush might unveil proposals for lowering taxes, which would raise the possibility of more deficit spending and bigger auctions of government securities. That would pressure interest rates higher.

Also, tax cuts could spur economic growth, which would increase the possibility of higher inflation. Higher interest rates and inflation push down bond prices.

The federal funds rate, the interest on overnight loans between banks, was 3.25%, down from 3.50% Wednesday.

Currency

The dollar closed at 1.4470 German marks in New York, near its all-time low of 1.4430 marks in February, 1991.

The mark has become an increasingly attractive currency recently because of high interest rates in Germany, analysts said.

The Labor Department’s weekly jobless-benefits claims report, which showed applications surging by 71,000 earlier this month, only reinforced the negative economic outlook.

The dollar closed in New York at 126.50 Japanese yen, down from 126.575 Wednesday. The British pound rose to $1.9395 from $1.9350.

Commodities

Silver for delivery in September settled 4.5 cents lower at $3.732 an ounce, a new contract low. The metal was trading as low as $3.715.

The plunge in prices reflected the fact that between 2.5 million and 3 million ounces of silver was dumped on the market in Zurich, Switzerland, according to Peter Cardillo, an analyst with Westfalia Investments Inc. in New York.

On other markets, gold fell, livestock and meat were mixed, grain and soybeans were higher, energy gained and cocoa plunged.

Cardillo said the amount of silver dumped Thursday may have been too much for the market to absorb in the wake of the dumping of 20 million ounces six weeks ago.

The selling was attributed to Sheik Khalid bin Mahfouz, former chief operating officer of National Commercial Bank. Mahfouz was indicted last month in New York on charges that he was involved in financial manipulations at Bank of Credit & Commerce International that led to BCCI’s collapse last year.

Gold futures followed silver lower, with the August contract losing 50 cents to $337.40 an ounce.

In energy markets, September light, sweet crude was 7 cents higher at $21.44 a barrel on the New York Mercantile Exchange.