Market Takes Breather; Dow Off 3 : Traders Taking Profits From Recent Gains, Analysts Say

NEW YORK —  Stock prices drifted lower in a generally trendless session Tuesday as the market took a breather from its record climb of the past three trading days.

The Dow Jones average of 30 industrials--which had reached record highs in each of the three previous sessions and soared more than 33 points in the process--fell 3.56 points to close at 1,622.82 on Tuesday.

Stock prices opened generally lower and remained within a narrow range throughout Tuesday’s session, surging briefly at midday before retreating near the close.

The same factors that have fueled the market rally still were in evidence, including lower world oil prices and declining interest rates, but analysts said many traders decided to cash in gains made during the market’s torrid advance.

“The market couldn’t get its footing and do anything, and I suspect it’s getting kind of labored,” said Monte Gordon, a vice president and director of research for Dreyfus Corp. in New York. “I don’t think it’s a sign of a correction, it’s a sign of a market that’s going to scan around and see what’s ahead.”

Was Due for Slowdown

Newton Zinder, senior vice president of E. F. Hutton in New York, said the market was due to slow down after staging big gains last week and throughout the past month, even though prices continued to be supported by positive factors such as a rally in the credit markets.

“The negative really is that you’ve come a long way in a short period of time, and the market is extended and overbought and you get profit taking,” Zinder said.

Johnson & Johnson led the list of most-active issues on the New York Stock Exchange, falling 1 1/8 to 50 5/8 with 4.24 million shares changing hands, but finished well above its lows of the day. Sales of the company’s Extra Strength Tylenol capsules were halted in Westchester County, N.Y., after a woman died of cyanide poisoning after taking the pain reliever, although the company and the FBI have said the death probably was an isolated incident.

Seven Chicago-area people died in 1982 after taking cyanide-laced Tylenol capsules.

Stocks of the major auto makers, which would benefit from lower oil prices, rose. General Motors was up 1 1/8 to 77 7/8 in heavy trading, Chrysler rose 2 7/8 to 54 and Ford was up 2 1/2 to 68 1/2.

Oil company stocks were mostly lower, with Amoco down 5/8 to 55 7/8, Chevron down 5/8 to 34 1/2, Kerr McGee down 5/8 to 25 3/4, Mobil down 5/8 to 27 3/8 and Occidental Petroleum down 7/8 to 25 5/8.

Clark Equipment fell 4 7/8 to 22 7/8. The company has announced a projected operating loss for 1986 and said it planned to move about one-third of its manufacturing operations overseas and sell its finance subsidiary.

Merger Partners Gain

In heavy trading, U.S. Steel rose 3/8 to 22 1/2 and Texas Oil & Gas rose 1/2 to 14. Shareholders of the companies overwhelmingly approved their merger, which would create one of the 15 largest industrial companies in the nation.

Eastman Kodak fell 2 3/8 to 48 1/2 in active trading. The company on Tuesday announced a cost-cutting program which would eliminate one of every 10 Kodak jobs worldwide.

CBS rose 3 3/4 to 118 1/2. The media giant reported sharply lower fourth-quarter earnings, but analysts said the results were better than expected. In addition, Loews Corp. reported that it had increased its stake in CBS to 12.3% from 11.9%.

Gainers outpaced losers by eight to seven on the New York Stock Exchange. Big Board volume totaled 141.25 million shares, against 129.91 million in the previous session.

Large blocks of 10,000 or more shares traded on the NYSE totaled 2,867, compared to 2,396 on Monday.

Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 168.59 million shares.

In the bond market, government, corporate and municipal bond prices rose and interest rates receded slightly amid some buying by professionals and smaller investors.

Hopes that Japanese buyers will increase their purchases of U.S. securities, which bear higher interest rates than Japanese securities due to Japan’s recent rate reductions, supported bond prices, analysts said.

A report showing less-than-expected growth in consumer debt during December aided the credit markets.

Debt Growth Slows

The Federal Reserve Board said growth in debt held by U.S. consumers slowed to an 11.5% annual rate in December from nearly a 20% pace registered during the past year.

In December, Americans took on $5.1 billion more in consumer debt than they paid off, up slightly from November’s $4.8-billion increase in debt outstanding. Both increases were far below the record $11.5-billion debt gain in September, the Fed said.

Analysts said traders think that weak oil prices will prevent inflationary pressures from building up even if economic growth accelerates.

Also, the strains that falling oil prices have put on the world financial system could steer the Fed away from restrictive monetary policies, analysts said. Many developing countries will lose some of their oil export earnings as prices fall, making it more difficult for them to repay their debts.

The central bank’s Federal Open Market Committee met privately Tuesday and today to review policy. Most analysts don’t expect the policy-making body to make any significant changes.

In the secondary market for Treasury securities, prices of short-term governments rose 1/16 point to 3/32 point, intermediate maturities were up from 1/32 point to 3/32 point and long-term issues moved up 7/32 point to 5/16 point, according to the investment firm of Salomon Bros. The movement of a point is equivalent to a change of $10 in the price of a bond with a $1,000 face value.

Treasury Indexes Rise

The Merrill Lynch daily Treasury index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, edged up 0.17 from late Monday to 111.19. The Shearson Lehman daily Treasury bond index, which makes a similar measurement, rose 1.43 to 1,166.02.

In corporate trading, industrials went up 3/8 point and utilities rose point. Trading was light.

Among tax-exempt municipal bonds, revenue bonds gained 5/8 point in moderate dealings and general obligations were up 3/8 point in light activity.

Yields on three-month Treasury bills fell six basis points to 7.12%. A basis point is one-hundredth of a percentage point. Six-month bills declined five basis points to 7.17% and one-year bills slid two basis points to 7.18%.

Yields on 30-year Treasury bonds dipped to 9.18% from 9.21% late Monday.

The federal funds rate, the interest on overnight loans between banks, traded at 7.813%, the same as late Monday.