FINANCIAL MARKETS : Dow Drops 23 as Traders Cash In : Market Overview

- Stocks closed sharply lower as traders cashed in on the market’s recent run-up. The Dow Jones industrials sank 22.96 points to 3,414.58. Transportation stocks led the market slide.

- The dollar plunged against the Japanese yen on speculation that the Clinton Administration may push for a stronger yen to help reduce Japan’s trade surplus.

- Bond yields rose slightly, though investor sentiment was positive after a successful Treasury auction of new three-year notes.

Stocks

Profit takers continued to chip away at stocks after last week’s big rally in the Dow.

“When the market couldn’t muster a rally in the morning, it sent a strong signal to lock in profits,” said Eugene Peroni, analyst with Janney Montgomery Scott in Philadelphia.

Declining issues outnumbered advancing ones by about 12 to 7 on the Big Board. But volume was relatively low: about 240 million shares, well below the 320-million-plus days of late last week.

Robert Caputo, director of research at Swiss Bank Corp., said the pullback was not surprising, especially considering that many industrial stocks have rallied 10% or more in recent weeks.

Also, some investors may be nervous about President Clinton’s apparent plan to raise corporate income taxes. Regarding taxes, Caputo said: “We’ve seen so many trial balloons over Washington that they’ll have to rehire traffic controllers to handle it all.”

Though stock prices are historically high, analysts note that growing expectations of a robust economy this year suggest that buyers will return before long.

Some experts are increasingly concerned about the slide in the NASDAQ market of smaller stocks. The NASDAQ composite index fell another 0.9% Tuesday to 692.21. Even so, the index is only off 2.3% from its recent peak.

Among the market highlights:

- Transportation stocks, which had led the market higher in January, lost some altitude. AMR, parent of American Airlines, lost 2 1/4 to 62 3/4; railroad CSX dropped 2 1/8 to 75 1/2; trucker Roadway lost 1 3/4 to 69 3/4, and UAL, parent of United Airlines, fell 4 to 126 7/8.

- Industrial stocks gave ground. Losers included Alcoa, down 1 1/4 to 75 1/4; International Paper, off 1 3/8 to 67 3/4; Cummins Engine, down 2 3/8 to 81 5/8, and Chrysler, off 1 1/4 to 39 1/4.

Bucking the trend was Whirlpool, which surged 2 7/8 to 51 5/8 on a strong profit report.

- Technology stocks continued to be slammed by profit takers. Cabletron Systems sank 4 3/4 to 79 1/4, Texas Instruments fell 1 3/8 to 51 3/8, Creative Technology tumbled 2 3/4 to 27 1/4, and Read-Rite lost 2 to 25. Also, System Software plunged 4 1/2 to 11 1/8 after projecting sharply lower quarterly earnings.

But Intel surged 4 3/8 to 110 1/2 after several analysts raised 1993 earnings estimates, citing the firm’s decision to concentrate near-term production on its highly profitable 486 computer chip rather than ramp-up its new chip.

- Restaurants were also targeted for profit taking. Outback Steak tumbled 2 3/8 to 30, Lonestar Steak slumped 3 5/8 to 42, and Cheesecake Factory gave up 1 1/8 to 23 3/8.

- Mattel dropped 1 1/8 to 22 5/8, showing further weakness after its big drop last week on disappointing quarterly earnings.

Overseas, London’s Financial Times-100 index plunged 38.7 points to 2,831.30, as the pound continued to weaken.

In Frankfurt, the DAX index lost 5.58 points to 1,641.58.

In Tokyo, the Nikkei average fell 259.46 points to 17,022.27.

Currency

The dollar plummeted against the Japanese yen as traders focused on talk that the Clinton Administration favors a weaker dollar against Japan’s currency.

In New York, the dollar fell to 121.28 yen from 123.73 on Monday.

Curtis Perkins, a trader at Chemical Banking Corp., said the yen gained at the dollar’s expense after a former U.S. Treasury official, C. Fred Bergsten, said the yen should be strengthened 15% to 20% against the U.S. currency.

That would make Japanese imports more expensive in the United States, potentially cutting demand and therefore cutting Japan’s huge trade surplus.

Japanese Finance Minister Yoshiro Hayashi is scheduled to meet Treasury Secretary Lloyd Bentsen this Saturday to address worsening trade tensions, prompting speculation that a yen appreciation could be offered as a quick cure.

Against other currencies, the dollar was mixed. It closed in New York at 1.654 German marks, down from 1.656 on Monday.

Credit

Bond yields inched up, but the success of the Treasury’s three-year note sale buoyed sentiment.

In the first stage of its three-day quarterly refinancing this week, the Treasury sold $15.65 billion of three-year notes at an average yield of 4.73%.

Demand was considered strong, boding well for the 10-year note sale scheduled for today.

Meanwhile, the yield on the 30-year T-bond closed at 7.20%, versus 7.19% on Monday.

Traders said selling of bonds increased late in the day after Johnson Redbook figures showed that sales at the nation’s retailers rose 3.7% in the first week of February. That suggested a continuing strong economy, which could eventually put upward pressure on interest rates.

Commodities

Lumber futures soared the permitted daily limit for the 12th straight day after the Clinton Administration made clear its resolve to protect wildlife in logging areas.

Spruce two-by-fours for March rose to $10 to a record $363.50 per 1,000 board feet on the Chicago Merc, eclipsing the previous record set Monday.

Meanwhile, on New York’s Comex, February gold rose 50 cents to $329.40 an ounce. March silver climbed 3.3 cents to $3.70.

On the New York Merc, light, sweet crude oil for March eased 3 cents to $20.05 a barrel.

Market Roundup, D6