Stocks rose only marginally Wednesday, fading into the close of a ho-hum sequel to Tuesday's dramatic rally, which propelled blue-chip indicators to their biggest point gains ever.
The Dow Jones industrial average, which rose a record 257 points on Tuesday, added 14.86 points to close at 7,894.64, surrendering most of an earlier 65-point gain after the release of some robust auto sales data that stoked the market's nagging inflation fears.
Broad-market indicators also posted slim gains, but it was enough to give the Russell 2,000 index of smaller-company stocks its fifth consecutive record high.
Stocks were rising steadily Wednesday until the bond market sagged, boosting interest rates, after General Motors Corp. and Chrysler Corp. reported stronger-than-expected August sales.
"It snapped a string of poor months in terms of retail auto activity, which is a good proxy for consumer spending," said Ned Riley, chief investment officer at the Bank of Boston, noting that the numbers may have been bolstered by rebates and other sales incentives.
In the bond market, the price of the key 30-year Treasury bond fell, raising its yield to 6.60% from 6.55% at Tuesday's close.
By contrast to the auto data, there was limited reaction to Wednesday morning's news that an index of leading economic indicators rose 0.3% in July, a shade above forecasts.
Blue-chip stocks pulled back sharply last month amid signs that strong consumer demand might aggravate inflationary pressures at the nation's factories.
But in the first major reading on last month's business activity, an association of factory executives reported Tuesday that manufacturing growth slowed in August. That reinforced hopes the Federal Reserve Board won't raise interest rates to slow things down and ease inflationary pressures.
With little major data due until Friday's August jobs report, many investors were reluctant to plow new money into the market, analysts said.
In the broader market, advancing issues outnumbered declines 3-2 in heavy trading on the New York Stock Exchange.
The Standard & Poor's 500-stock index, which surged a record 28 points on Tuesday, rose just 0.28 point to close at 927.86 on Wednesday despite posting an 8-point gain earlier in the session.
The Russell 2,000 rose 0.74 point to close at 428.79, its fifth-straight winning session. The NYSE composite index, which has a larger number of small companies than the S&P; 500, rose 0.81 point to close at 483.71.
The Nasdaq composite index, up more than 11 points Wednesday afternoon, rose just 0.15 point to 1,618.24 as technology issues grappled with a discouraging outlook from computer maker Gateway 2000.
Among Wednesday's highlights:
* The Dow's strongest components were Eastman Kodak, up $1.88 to $69.25; United Technologies, up $1.63 to $81.75; and AlliedSignal, up $1.50 to $87.50.
* Technology stocks were mixed. Gateway slid $3.75 to $32.81 on a weak sales report, Compaq Computer fell $1.69 to $66.81. Dell Computer, however, rose $2.63 to $86.75.
In currency trading, the dollar fell against most major currencies as fresh economic news from Germany and comments from the nation's central bank chief stoked fears of higher German interest rates.
The Bundesbank president, Hans Tietmeyer, warned that the central bank could not ignore signs of rising prices, but he stressed it was premature to speak of a general inflationary threat.
He also said he welcomed the mark's gains versus the dollar in recent days.
The dollar's decline accelerated when the German economics ministry reported pan-German industrial production had jumped a stronger-than-expected 3.5%. The dollar fell to 1.8212 German marks and 121.30 Japanese yen from 1.8345 marks and 121.47 yen late Tuesday.
Overseas, Tokyo's Nikkei stock average rose 2.8%, Frankfurt's DAX index rose 1.4% and London's FTSE-100 rose 0.5%.
Market Roundup, D8