Profit Taking Takes 30.64 Out of Dow Average : Market Overview

Highlights of Tuesday’s market activity, compiled from Times staff and wire reports:

* Stock prices tumbled amid heavy profit taking, but market analysts called the session a healthy correction after the rapid run-up of the past month.

The Dow Jones industrial average fell 30.64 points, or nearly 1%, to 3,223.39, and smaller stocks sank much more.

* Bond yields closed slightly lower in trading driven by technical factors.

Stocks

Analysts attributed stocks’ drop in part to investors selling high-priced growth issues with a view toward using the money to buy into companies that stand a greater chance of benefiting from an economic upturn.

Declining issues outnumbered advancers 2 to 1 on the New York Stock Exchange, where volume rose to 218.80 million shares from Monday’s 180.91 million.

Traders said stocks have simply risen too far too fast the past several weeks, and that a selloff was overdue. But they also said investors remain bullish, and noted that trading volume was moderate Tuesday compared to recent sessions.

Trader Jim Benning at BT Brokerage said Tuesday’s drop “doesn’t represent any reversal of a trend. It’s just a breather.”

Computer-driven program selling contributed to the decline, but analysts and traders said there was enough buying interest to keep the Dow from falling below a support level of 3,215.

Smaller stocks, the market’s stars in the past year, took the biggest hit Tuesday. The NASDAQ composite index of smaller stocks plummeted 14.51 points, or 2.3%, to 604.87.

Among the market highlights:

* Stocks’ selloff was again led by health care issues, which have scored the biggest gains over the past year. Among drug and biotech firms, Immune Response plunged 3 to 36 1/4, Bristol-Myers dropped 2 7/8 to 81 3/4, Pfizer lost 2 3/8 to 73 7/8, and Syncor International sank 2 1/4 to 24.

* Other leading growth stocks that suffered large hits included retailer Wal-Mart, off 1 1/4 to 54 1/2; retailer Home Depot, down 3 1/8 to 61 3/4; Microsoft, off 3 1/8 to 119 3/8, and surgical-device maker U.S. Surgical, off 7 to 110 1/4.

* Some industrial stocks that had jumped sharply last week also slipped. Illinois Tool lost 2 5/8 to 65 3/8, Tenneco lost 1 5/8 to 35 3/8, and Caterpillar slid 1 1/2 to 46 3/4.

Overseas, Tokyo’s 225-share Nikkei average ended down 407.55 points, or 1.9%, at 20,913.82. That was its lowest level since Oct. 1, 1990, when it was at 20,221.86.

In Frankfurt, the 30-share DAX average ended up 6.18 points at 1,677.17, its highest close since June 26, 1991.

London’s Financial Times 100-share average closed up 8.2 points at 2,544.9, buoyed by stronger pharmaceutical stocks and futures-linked buying.

Credit

A slight drop in bond yields was a follow-through from a rally Friday, traders said.

The price of the Treasury’s bellwether 30-year bond rose 3/32 point, or 94 cents per face amount. Its yield, which falls as the price rises, slipped to 7.56% from 7.58% Monday.

Bond yields generally fall on poor economic figures, with traders assuming that interest rates are more inclined to fall.

The bond market in recent weeks has been battered by heavy selling because investors have turned to the stock market for better yields.

The federal funds rate, the interest on overnight loans between banks, jumped to 4.50% from Monday’s 2.50%.

Banks are reaching the end of a two-week accounting period, when the federal funds rate often fluctuates for technical reasons.

Currency

The dollar was mostly lower against other currencies in nervous and directionless trading.

Analysts said foreign exchange markets were uncertain about what direction the dollar should take. After central bank intervention pushed it down Friday, many traders were hesitant to bid the greenback sharply higher or lower.

The dollar was mixed against the yen, falling in Japan but climbing in New York. It rose to 123.68 in New York from 123.25 Monday.

The dollar fell in New York to 1.587 German marks from 1.592. The British pound rose to $1.805 from $1.798.

Commodities

Orange juice futures prices plunged for the sixth straight day on New York’s Cotton Exchange as the weather outlook in Florida’s citrus-growing areas improved.

On other commodity markets, energy futures plummeted, livestock and meat futures rallied, grains and soybeans were mixed, and precious metals posted slight gains.

Orange juice for delivery in March settled 3.5 cents lower at $1.4155 a pound. Prices have fallen more than 14 cents since Wednesday because of the weather and changing supply outlook.

More than 68 million boxes have been picked, and there is little chance that the remaining fruit will be touched by frost, analysts said.

Light, sweet crude oil for February delivery dropped 42 cents to $18.47 a barrel on the New York Mercantile Exchange. Traders were disappointed with a production cutback announced by OPEC superpower Saudi Arabia.

On New York’s Commodity Exchange, February gold rose 20 cents to $358.40 an ounce; January silver climbed 0.6 cent to $4.263 an ounce.

Market Roundup, D6