MARKETS : Dow Dips 0.81 as IBM Shares Continue Fall : Market Overview

Stocks eased in quiet trading, giving back only a bit of Friday’s sharp gains in a session marked by another big drop in the shares of International Business Machines.

* Coffee prices surged, while oil stabilized and gold and silver slumped.

Stocks

The session was dominated by big moves in a handful of stocks, while most showed little change.

The Dow industrials, which had surged 44.04 points Friday in futures-linked trading, spent much of the day off about 5 points before rallying late to close down 0.81 point at 3,312.46.

Losers topped winners by about 9 to 8 on the New York Stock Exchange. Volume was 226.22 million shares, down from Friday’s futures-inflated 389.30 million.

“It’s a typical slow start of a typically slow week,” said Mary Farrell, investment strategist at PaineWebber, noting fewer trading days because if the holiday.

IBM continued to be trounced, falling 2 1/2 to 48 7/8--near its lowest level since the 1970s. The company, which last week set a major restructuring in an attempt to turn its sagging fortunes, said Monday that it will bring two managers out of retirement to help.

And while IBM sank, some of its rivals continued to surge. Intel rocketed 4 1/2 to 90, Apple gained 1 3/8 to 59 5/8, Compaq rose 1 1/2 to 47, and Dell Computer jumped 1 3/8 to 46.

Among the market highlights:

* As is traditional, institutional investors appeared to be carefully picking the stocks they want to show on year-end statements to clients--and dumping losers. Among the big winners Monday were J.P. Morgan, up 1 3/8 to 65 3/8; GE, up 3/4 to 87 1/2, and Cummins Engine, up 1 3/8 to 76 1/2.

On the downside, Dupont lost 1 to 49 7/8, and Goodyear fell 1 3/8 to 64 1/4.

* Time Warner, whose ailing chairman died Sunday, added 1/2 to 29 3/8. Some investors appear to be betting on rapid change in the wake of a board reshuffling that forced out many insiders.

* USAir fell 1 1/4 to 11 3/4 on expectations that the federal government this week will nix a $750-million investment in the airline by British Airways.

* Among other losers, Wal-Mart fell 1 3/4 to 63 7/8 on news that NBC-TV will air a special report that questions the retailer’s “Buy American” campaign.

Also, restaurant chain Shoney’s slumped 1 1/2 to 21 5/8 on a report that the company’s former chairman was ousted by directors because of his aggressive advocacy of affirmative action in hiring.

Overseas, German shares climbed 1.6% as strong futures and options buying along with year-end technical trading pushed prices higher. Frankfurt’s DAX average climbed 23.54 points to 1,515.58.

The London market posted record highs in heavy trading, boosting optimism that a year-end rally is firmly underway. The Financial Times 100-share average closed up 18.0 points at 2,807.70.

In Tokyo, the Nikkei index lost 35.30 points to 17,645.44.

Credit

Long-term interest rates fell, but analysts attributed the move to technical trading.

The yield on the Treasury’s 30-year bond dropped to 7.39% from 7.42% Friday, while short-term rates were mostly stable.

Robert Brusca, economist at Nikko Securities, said long-term bond yields were affected by “short covering”: Traders who had previously sold borrowed bonds--betting that interest rates would rise at year’s end--gave up their bet and repurchased bonds to cover their positions.

With President-elect Bill Clinton continuing to vow a federal debt-reduction plan, “there continues to be a feeling that the environment for fixed income securities is favorable,” said Kevin Flanagan, economist at Dean Witter in New York.

The federal funds rate, the interest on overnight loans between banks, was 3.0%, up from 2.50% late Friday.

Commodities

Coffee futures prices reached their highest level in nearly 14 months on New York’s Coffee, Sugar & Cocoa Exchange as the market continued a rally linked to shrinking supplies from Colombia and Brazil.

Green, unroasted coffee for March delivery surged 2.20 cents to 80.90 cents a pound, the highest settlement for near-term deliveries since Oct. 30, 1991.

There was no fresh news behind the move. The surge mainly reflected speculative buying as the price surpassed 80 cents a pound, “an important psychological barrier,” Merrill Lynch analyst Judith Ganes said.

Meanwhile, near-term gold futures dropped $2.90 to $334.00 an ounce on New York’s Commodity Exchange on renewed selling by producers, especially in South Africa, said James Steel, metals analyst with Refco Inc.

Near-term silver futures slid 3.4 cents to $3.73 an ounce.

Oil prices stabilized after last week’s gains, with near-term light, sweet, crude futures adding 8 cents to $19.98 a barrel on the New York Mercantile Exchange.

Currency

The dollar settled mostly higher in quiet, pre-holiday trading on world currency markets.

Traders said there was virtually no news to move the market. “It certainly feels like people have closed their books for the year,” said Michael Malpede, analyst with MMS International.

The dollar closed in New York at 1.568 German marks, little changed from Friday’s 1.565 marks. It also eased to 123.10 Japanese yen from 123.18 Friday.

The British pound was quoted at $1.558, down from $1.567 Friday.

Market Roundup, D8