FINANCIAL MARKETS : Profit Taking Clips Stocks; Oil Prices Slide : Market Overview

Stocks closed mostly lower as profit taking slammed many recent high flyers. Casino, cable TV and banking stocks fell sharply, while industrial stocks rose again.

* Oil futures dropped on selling sparked by fears of an increase in OPEC production quotas. Gold and silver also were lower.

* Bonds stabilized, as rates eased slightly after rocketing on Friday on the upbeat May employment report.

Stocks

Some of the market’s strongest stocks in recent weeks were hit hard by profit taking. Traders said many investors were reacting late to the jump in short-term interest rates on Friday.

Losers topped winners by 3 to 2 on the New York Stock Exchange and by about the same margin on the NASDAQ market. The NASDAQ composite index slid 7.40 points to 694.61.

The Dow industrials, however, were buoyed by a continuing flow of cash into cyclical stocks. By the close the Dow was off just 13.01 points to 3,532.13.

Trading volume was typically slow for a Monday at 236.92 million shares on the Big Board.

Analysts said the strength of industrial stocks indicates that investors believe the economy is improving, as was suggested by Friday’s May employment report.

At the same time, a stronger economy would be expected to push interest rates higher as the year progresses. Higher rates tend to hurt financial stocks and high-flying growth stocks.

Some analysts worry that Wall Street’s bull run cannot continue on the backs of the cyclical stocks alone. “I think the market is showing extreme signs of running out of gas,” said Peter Canelo, strategist at NatWest Securities.

Among Monday’s highlights:

* Casino stocks, which have zoomed in recent weeks on optimism about the spread of gaming nationwide, sold off. Circus Circus sank 3 1/8 to 56 1/2, Casino Magic tumbled 8 to 70 1/2, Grand Casinos dropped 3 1/8 to 43 3/4 and Sahara Resorts lost 5 1/2 to 27 1/2.

* Many cable TV-related stocks also pulled back after stellar gains recently. Tele-Communications Inc. ‘A’ fell 3/4 to 22 7/8, Liberty Media dropped 2 1/2 to 22 3/4, Cablevision Systems eased 1 1/8 to 35 3/4 and Comcast lost 7/8 to 22 3/4.

* Banking and insurance stocks were broadly lower on worries about rising short-term interest rates. Wells Fargo plunged 5 1/4 to 95 3/4, BankAmerica fell 1 to 42, First Interstate dropped 2 3/8 to 53 7/8, Mellon gave up 1 1/2 to 51 5/8, Citicorp tumbled 1 3/8 to 26 3/8 and Travelers slid 1 3/8 to 28 1/4.

* Technology stocks were hammered. Apple lost 4 1/8 to 50 3/4. A Dean Witter analyst cut earnings estimates on fears of slower-than-expected sales. Among other tech issues, Compaq dropped 3 3/4 to 56, Sun Microsystems fell 1 to 31, IBM slid 1 3/4 to 52 1/4 and Oracle gave up 2 1/2 to 41 1/2.

Also, Advanced Micro Devices plummeted 4 1/4 to 23 3/4 following a court ruling that favors rival Intel in their dispute over the design of Intel’s 386 chip. Intel rose 1 3/4 to 58 1/8. The stock split two-for-one effective Monday.

* On the plus side, many industrial issues gained. Caterpillar rose 3/4 to 75 1/2, Deere added 3/4 to 65 3/8, Illinois Tool jumped 1 5/8 to 76 1/2, Chrysler was up 3/8 to 47 and Inland Steel jumped 3/4 to 26 1/4.

But Cooper Tire plunged 7 3/4 to 25 1/8 after saying second-quarter earnings will probably fall below year-earlier levels because of weakness in the replacement-tire market. However, the firm said it could make up the shortfall in business later this year.

* Growth-stock favorite Home Depot lost 2 1/8 to 42 3/8 after Montgomery Securities downgraded the retailer to hold from buy.

Overseas, Frankfurt’s DAX index shot up 17.76 points to 1,655.61. In London, the FTSE-100 index rose 14.9 points to 2,844.8. In Tokyo, the Nikkei eased 38.05 points to 20,844.19.

In Mexico City, the Bolsa index fell for a sixth session, losing 20.50 points, or 1.3%, to 1,554.64. Traders expressed worries about a slowing Mexican economy. In U.S. trading, Telmex slid 7/8 to 45, a 1993 low.

Commodities

Oil prices dropped as OPEC ministers converged on Geneva for what may be bruising negotiations, after Kuwait staked its claim to a 30% hike in its production quota.

Light, sweet crude for delivery next month fell 23 cents to $19.54 a barrel on the New York Merc.

Thomas Blakeslee, energy strategist at Brody, White & Co., said there was no specific negative news pressuring the market lower, just a negative tone in advance of the OPEC meeting.

The focus of the OPEC meeting will be Nigeria and Kuwait, which have called for higher production ceilings to allow them to pump additional crude. They are bitterly opposed by Iran.

If higher-output demands are met, oil could be driven lower this summer, Blakeslee said. But if OPEC agrees to lower production levels, “it’s likely to be perceived as bullish in the short run,” he said.

Meanwhile, in precious metals trading on the New York Comex, near-term gold futures eased $2.80 to $374 an ounce. Silver fell 2.9 cents to $4.41.

Credit

Interest rates were a bit lower, following their jump on Friday.

Short-term rates in particular had zoomed on Friday after the May employment report hinted at new economic strength. Many bond traders believe that makes it more likely that the Federal Reserve will tighten credit soon.

But on Monday, the market was relatively calm. The discount rate on one-year Treasury bills slipped to 3.49% from 3.50% Friday.

The yield on the Treasury’s 30-year bond retreated to 6.87% from Friday’s 6.91%.

Dan Bernstein, analyst at Bridgewater Associates Inc. in Wilton, Conn., was one of several analysts who said bonds’ selloff on Friday had gotten out of hand.

“We thought Friday’s move was an overreaction (to) the employment report. Today’s move is a bounce back from that,” he said.

But the bond market faces a new test on Friday, when the government reports on producer-price inflation in May. A higher-than-expected number could cause inflation fears to return, driving interest rates up anew.

Dollar

The dollar finished mostly lower in New York, and opened today in Tokyo at a new postwar low against the Japanese yen.

Analysts said the dollar was poised for a technical correction following its gains on Friday, when it got a boost from the unexpected surge in May employment.

In New York, the dollar eased to 1.621 German marks from 1.626 on Friday. It also fell to 107.25 yen, down from 107.75 Friday. Early today in Tokyo the dollar hit 106.80 yen, a new postwar low.

Market Roundup, D8