FINANCIAL MARKETS : Dow Slips, but Broader Market Posts Big Gains

Market Overview

* While blue chip stocks lagged, the broad market advanced strongly, led by a rebound in smaller stocks. The NASDAQ composite index shot up 1.7%.

* Long-term bond yields fell sharply for a second day, responding to new signs of economic weakness and to speculation about the Treasury’s plans for next week’s big bond sale.

* The dollar weakened further amid jitters about the economy.

Stocks

The Dow industrials, which rose 18.91 points Monday, couldn’t keep the rally going. But smaller stocks zoomed, led by technology issues and cable TV shares.

Analysts said enthusiasm for blue chip stocks may have been cooled by another downbeat economic report.

The government said the March leading economic indicators posted a 1% drop. That followed Monday’s report by the National Assn. of Purchasing Management that manufacturing activity slumped broadly in April.

Despite another drop in interest rates on the latest economic news, the Dow slipped 0.27 point to 3,446.19 for the day.

But the broader market was far stronger. Winners topped losers by 13 to 7 on the NYSE and by a slightly wider margin on the NASDAQ. Big Board volume was 268.31 million shares, up from Monday’s 224.97 million.

The rebound in the NASDAQ market was powered by technology issues, many of which have slumped badly in recent weeks. The NASDAQ composite index soared 11.45 points to 678.16.

The renewed interest in smaller stocks may be a direct result of worries about the economy, some analysts said. “If you think the economy is slowing, you go where the growth is,” said David Shulman, strategist at Salomon Bros.

Jack Solomon, a technical analyst at Bear Stearns, said the NASDAQ index was regaining ground after breaking below a key support level of 650 last Monday. If the index had continued falling from there, it could have foreshadowed a significant new decline in small stocks, some experts said.

Among the market highlights:

* The technology rally was led by Intel, which jumped 4 3/8 to 101 3/8. A news report said the computer chip maker would get a manufacturing plant from IBM that would greatly boost Intel’s production capability. Intel dismissed the talk as speculative.

Other tech stocks also surged, as investors responded to what many analysts say is still a robust market for personal computer and software sales, despite the economy.

Apple rose 1 1/2 to 53 3/8, Adobe Systems surged 3 1/8 to 62 3/8, Dell Computer jumped 2 3/8 to 31 3/4, Microsoft rose 1 7/8 to 88, Autodesk leaped 3 to 45 and Newbridge Networks gained 2 to 64.

* Cable TV stocks soared after the federal government unveiled a set of rate rollback guidelines that are less stringent than previously feared. The rollbacks have been a source of concern in the industry for the last month.

Tele-Communications surged 2 1/2 to 21 1/2, Comcast jumped 2 1/8 to 20 5/8, Cablevision zoomed 3 5/8 to 33 1/4 and Time Warner soared 3 1/8 to 36 1/8. Time Warner also benefited from renewed rumors that investor Warren Buffett is buying a stake in the firm.

* Bank stocks, which have been weak in recent weeks, seemed to get a lift from falling interest rates. Mellon jumped 3 to 57 1/8, Wells Fargo added 2 5/8 to 107 3/8, First Interstate surged 1 3/8 to 56 7/8, Citicorp gained 3/4 to 28 3/8 and NationsBank was up 1 5/8 to 50 5/8.

* Restaurant stocks rebounded with other growth issues. Outback Steak rose 1 7/8 to 31 3/4, Sonic leaped 1 3/8 to 23, Checkers Drive-In gained 1 3/4 to 20 3/4 and Au Bon Pain added 1 to 25 1/2.

* On the downside, Reader’s Digest plummeted 6 to 40 1/2 after reporting disappointing U.S. sales for the third quarter. Another loser was transportation equipment lessor XTRA, which slid 6 5/8 to 92 1/4 on lower than expected earnings.

* Among Southland issues, Litton Industries zoomed 2 to 60 1/2, an all-time high. The firm’s industrial-automation unit won a $14-million contract to provide engine production systems for China’s Jian Gxi Motors, a maker of light trucks.

Elsewhere, Ventura County National Bancorp tumbled 1 1/2 to 2 1/2. The firm said its chief executive, William E. McAleer, had resigned.

Overseas, London’s Financial Times 100-share average eased 0.5 point to 2,812.6. Frankfurt’s DAX average lost 1.79 points to 1,627.37. The Tokyo market remained closed for the Golden Week national holiday.

Credit

Interest rates closed broadly lower for a second day, after the report on leading indicators.

By day’s end, the yield on the Treasury’s 30-year bond was down to 6.79% from 6.85% on Monday.

The greatest part of the decline in rates came in afternoon trading, after the Treasury announced that it was boosting sales of bills, its shortest-term maturities.

Some traders apparently took the move as a sign that the Treasury plans to sell fewer long-term bonds at its quarterly financing next week. An announcement on that offering is due today.

Conservative analysts predict a $500-million cut in the long-bond supply and a $250-million reduction in shorter-term maturities.

Other analysts have issued bolder projections: Goldman, Sachs & Co. chief economist Robert Giordano has said he believes the Treasury may eliminate the 30-year bond at next week’s auction, then start selling them semiannually instead of quarterly.

The federal funds rate, the interest on overnight loans between banks, was unchanged at 2.938%.

Other Markets

Currency traders are hoping that April employment data, to be released Friday, will give a more accurate picture of the economy’s health. Until then, however, many are selling the dollar.

By 4 p.m. in New York, the dollar fell to 110.25 Japanese yen and 1.576 German marks, down from late Monday’s 110.78 and 1.581, respectively. The British pound rose to $1.566 from $1.565 late Monday.

Meanwhile, in commodities trading, platinum futures prices were pounded by signs of sluggish economic growth and perceptions that the metal had become overvalued in its recent run to a 23-month high.

Silver futures also fell, extending Monday’s loss, while gold prices firmed slightly.

Platinum for July delivery sank $9.30 on the New York Mercantile Exchange to $377.30 an ounce. The move followed a $3.30 drop Monday.

On New York’s Commodity Exchange, gold for current delivery rose 40 cents an ounce to $354.80. Silver fell 2.4 cents to $4.266 an ounce after a plunge of 9.9 cents Monday.

Light, sweet crude oil for June delivery fell 18 cents on the New York Mercantile Exchange to $20.39 a barrel.

Market Roundup, D6