Stocks retreated Monday in the New York Stock Exchange's slowest full session of the year as investors hunkered down before a series of key economic readings that could jolt the market.
"I haven't seen the market so lethargic and volume so low in a while," said Stanley Nabi, vice chairman at Wood Struthers & Winthrop. "The next two weeks, with all the figures coming out, will tell the tale."
The Dow Jones industrial average fell 38.47 points to 5,434.59, sliding into the close of a sleepy session that contrasted sharply with the market's recent volatility. It was the first time in two weeks that the blue-chip barometer didn't trigger curbs on computer-driven trading, limits that are imposed by a 50-point swing.
The Nasdaq composite index fell 12.97 points to 1,066.47. Nasdaq volume of 418 million shares was the second slowest this year, after 399 million shares on Jan. 2.
Other broad-market indexes also held near opening levels for much of the day before succumbing to a worsening bond market in the last hour of trading.
The yield of the Treasury's main 30-year bond rose to 7.09%, up from 7.01% Friday.
"The bond market's getting jitters over the data coming out," said Peter Canelo, chief investment strategist at Dean Witter Reynolds.
The week's potential market time bombs include Tuesday's quarterly reading on the employment cost index, which Federal Reserve Board Chairman Alan Greenspan referred to as a key indicator in his recent report to Congress.
Last week's economic readings eased inflation fears, but analysts said it was unclear whether the economy was slowing enough to avert a Fed interest rate hike.
Even if the employment cost index shows a mild increase, investors were unlikely to take chances before Friday's report on July employment. Four of the last five monthly employment reports have sent the market into a tailspin with surprisingly strong growth in new jobs and hourly wages.
Rapid inflation makes fixed-income investments like bonds less valuable, and the resulting increases in interest rates can hurt stocks by raising corporate borrowing costs and slowing revenue.
Among the big movers in the stock market were companies involved in security after the pipe bomb explosion at the Atlanta Olympics and the TWA plane explosion off Long Island.
Barringer Technologies rose 2 1/4 to 10 3/8 on news that its Ionscan explosive detector met Federal Aviation Administration security rules. Magal Security Systems fell 2 1/8 to 9 after hitting a 52-week high of 15 3/8. Josephthal, Lyon & Ross cut the stock to sell from hold, noting the shares have soared 450% since the July 17 TWA crash.
Airport security personnel trainer ICTS Holland Production rose 3 5/8 to 12 3/4.
Among other market highlights:
* CalFed Bancorp gained 1 1/4 to 22 5/8 after it announced a merger with First Nationwide Holdings valued at $1.2 billion.
* Newbridge Network slumped 6 1/2 to 41 5/8 after Needham & Co. raised concerns over the company's earnings.
* Reebok climbed 3 1/2 to 34 3/4 on news of a big stock buyback.
* Carver Federal Savings bank stock rose to a three-month high after a former Wall Street banker offered to buy a controlling stake in the bank, the nation's largest black-run financial institution. Carver rose 3/4 to 8 3/4.
* The Dow's biggest decliners were cyclical issues, which would suffer the most if the Fed raised interest rates. United Technologies fell 2 5/8 to 109 5/8; Boeing dropped 1 7/8 to 86 1/2; Caterpillar lost 1 1/4 to 65; and DuPont shed 1 to 79 1/2.
Overseas, Tokyo's Nikkei stock average fell 0.7%, Frankfurt's DAX index rose 0.3% and London's FTSE 100 rose 0.1%.