Profit-Takers Help Clip 77 Points Off the Dow

The Dow fell for the first time in nearly two weeks Monday as investors locked in gains from the rebound in financial stocks. But technology shares, the other leader of last month’s rebound, extended the Nasdaq recovery.

The Dow Jones industrial average edged within 15 points of 9,000 just after the open, but then fell as much as 130 points before closing at 8,897.96 for a loss of 77.50 points.

Most broad-market indexes also gave back some of last week’s gains, which pushed the market to its highest level since late July.

Bond prices posted their biggest gain in more than a month as tumbling stocks and the highest yields in more than 10 weeks boosted the appeal of Treasury debt.

At current levels, “I would be disinclined to sell Treasuries and more inclined to buy them,” said William H. Gross, who oversees about $137 billion in bonds at Pacific Investment Management Co. in Newport Beach.

The yield on the benchmark 30-year T-bond fell to 5.29% from 5.38%.

It was the Dow’s first down day in nine sessions and just the fifth losing session since the market turnaround began a month ago. And thanks to Monday’s partial recovery, the Dow still hasn’t suffered a 100-point loss since Oct. 1.

The latest spurt of profit-taking comes after a rebound of more than 1,500 points, or 20%, since the Dow slid below 7,500 on Oct. 8.

The Standard & Poor’s 500 index fell 10.81 points to 1,130.20, but the technology-heavy Nasdaq composite index rose 4.49 points to 1,861.05.

Declining issues outnumbered advancers by a 7-4 margin on the New York Stock Exchange.

The dollar made its biggest gain in nine weeks against the Japanese yen, rising to 121.57, and climbed to a six-week high against the German mark as currency investors speculated that the Federal Reserve Board will leave interest rates unchanged at its next meeting. A rate cut would dull the allure of the dollar by reducing returns on many dollar-denominated assets.

“It is not written in stone that interest rates have to come down” at the policy meeting Nov. 17, said Marshall Acuff, an equity strategist at Salomon Smith Barney.

The magnitude of the stock market’s recovery has led to renewed worry about whether share prices overstate a company’s profit outlook.

Even so, the selling pressure remained restrained Monday, suggesting that this rally may have enough fuel to lift the Dow past the July 17 record of 9,337.97.

“The rebound has been so strong that we may be a bit overbought, but it’s such a traditionally strong time going into November, December and January that I wouldn’t bet against further upside,” said Barbara Marcin, senior equity portfolio manager at Citibank Global Asset Management, referring to the flow of new money from year-end tax and retirement strategies.

“There’s a question of valuation, but valuation has so little to do with performance, particularly over a three- or six-month period,” Marcin said.

Among Monday’s highlights:

* J.P. Morgan fell $4 to $99.75, American Express lost $2.44 to $94.88 and Citigroup declined $1.25 to $44.88 to lead the Dow’s retreat.

Other banks and financial services companies helped lead the market lower. Bank One dropped $2.13 to $51.81, Chase Manhattan slipped $2.69 to $58.31 and BankAmerica fell $2.31 to $60.13.

* IBM rose $1.44 to $151.38 as the Dow’s strongest component, while Dell Computer gained $3.31 to $69 and Microsoft advanced $1.38 to $110.69.

Internet stocks also bolstered the tech group, with America Online rising $4.75 to $144.75 and Excite up $7.50 to $47.50. Yahoo, the No. 1 Internet directory firm, surged $11.19 to a record $164.75.

* Starbucks sank $2.56 to $46.38 after an analyst said the largest U.S. coffee seller will have to reduce its fiscal 1999 earnings forecasts as it spends more to expand overseas and into grocery chains.

Overseas, Japan’s Nikkei stock average rose 0.5%, Germany’s DAX index fell 1.4%, and Britain’s FTSE-100 fell 1%.

Market Roundup, C14