A dearth of market-moving news kept stocks mixed Thursday. Share prices closely followed the bond market, just as they have for weeks.
Analysts said inflation fears remain in check for now, so there was little to push buying or selling ahead of the long Memorial Day weekend.
The Dow Jones industrial average was dragged down all day by Philip Morris, whose shares were hit after the company's directors voted against splitting their food and tobacco businesses. The blue chip average fell 1.84 points to 3,753.46.
In the broader market, advancing issues outnumbered declining issues by about 9 to 7 on New York Stock Exchange volume of 256.05 million shares.
Treasury bond yields edged upward, with the market sitting tight ahead of a long holiday weekend and scheduled remarks by Federal Reserve Board Chairman Alan Greenspan.
The long bond's yield closed at 7.35%, up from 7.34% on Wednesday. Its price, which moves in the opposite direction, fell 4/32 point, or $1.25 per $1,000 in face value.
The Commodity Research Bureau's index, a measure that tracks 21 commodities, fell for the third straight day. The index dropped 2 points to 229.6, and is down from Monday's 239.2, the highest reading since October, 1990. Commodity prices are considered an indicator of inflation, which diminishes the value of fixed-income securities.
Uncertainty about inflation--and how high the Fed will raise interest rates to curb it--has kept stock and bond investors nervous for several months. Higher rates and inflation can harm the value of both stock and bond investments.
Mary Farrell, investment strategist at PaineWebber Inc. in New York, said: "The stock market is focusing on the bond market, and the bond market prior to that last rate increase clearly was fearing inflation. Now we've gotten some slower (economic) growth numbers, in retail sales and elsewhere, so it appears the higher interest rates are slowing growth and taking some of the fear out of the bond and stock markets."
Among other major market indicators, the New York Stock Exchange's composite index gained 0.55 points to 252.61. The Standard & Poor's 500-stock index gained 0.72 to 457.06, while the Nasdaq composite index of mostly smaller company stocks, lost 0.43 to 731.64, hurt by weak technology issues.
Among Thursday's highlights:
* Philip Morris was the most active NYSE issue, dropping 3 1/8 to 50 5/8. Boeing helped offset the industrial average's cigarette blues, gaining 2 1/2 to 47 on a report in the Wall Street Journal that it is near a deal with China for more than 50 commercial airliners, valued at more than $5 billion.
* United Technologies rose 5/8 to 65 1/2 on speculation that its jet engine division may get some of the business from the possible Boeing-China deal.
* Upjohn surged 3 7/8 to 33 on what analysts said was a new round of rumors about a possible takeover deal.
* Computer Associates gained 6 to 43 1/8 after its quarterly earnings came in well ahead of Wall Street expectations.
* Morton International, a maker of specialty chemicals, gained 1 1/2 to 82 7/8. A.G. Edwards & Co. upgraded the stock to "buy."
* Software maker Lotus Development lost 2 to 61 1/8. Some analysts were disappointed in the company's earnings predictions Wednesday.
In overseas trading, share prices slid further in Frankfurt on a wave of foreign selling. The DAX 30-share average closed at 2,130.25, down 28.52 points. The DAX is down some 118 points in three days.
Tokyo's Nikkei 225-share average fell 167.83 points to close at 20,495.80, while in London, the Financial Times 100-share average lost 1 point to finish at 3,019.7.
Mexico City's Bolsa index declined 16.71 points, or 0.68%, to close at 2,455.45.
Meanwhile, the dollar rose against most major currencies, rebounding from an early drop as many traders concluded that the world's central banks would step in to rescue the dollar if it fell any further.
Traders said the dollar came under pressure early in Europe as markets sold dollars in exchange for German marks. The dollar hit 1.6390, the lower end of its range against the mark, but buyers then stepped in and bid the greenback up. The dollar closed in New York at 1.648 marks, up from 1.645 on Wednesday. It also fetched 104.65 Japanese yen, up from 104.35.
In commodities trading, gold weakened on the New York Comex, falling $2.80 an ounce to close at $383.80. Silver brought $5.450 an ounce, down from $5.533 on Wednesday.
Market Roundup, D6