Rate Cut Fails to Fire Up Stocks; Dow Rises 8.91 : Market Overview

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

* A late round of buying carried the stock market to a moderate gain Monday, despite hesitancy about the progress of the economy. The Dow Jones industrial average added 8.91 points to 3,339.20.

* Bond yields continued to ease in the wake of the Federal Reserve’s sharp cut in interest rates last Thursday.

* Early today, Hong Kong stocks suffered steep losses after Sino-British talks on the colony’s new airport broke down.

Stocks

Traders said many investors were still sorting out the weaker than expected June employment report issued late last week. Uncertainty kept stocks churning in a narrow range most of the day.

The employment report triggered the Fed’s interest rate cut because it raised new fears about another recession. Stock investors Monday were weighing the benefits of the rate cut against worries that corporate profits will lag in a weakening economy.

The strongest stocks were those that should post relatively stable earnings growth even if another recession ensues. Many of those issues, such as in the drug and food industries, had lagged industrial stocks in the first half of this year.

In the broad market, advancing issues outnumbered declines 5 to 4 on the New York Stock Exchange. Big Board volume came to 186.92 million shares, down from Thursday’s 220.20 million. Markets were closed Friday.

Many experts see a dull market ahead. David Shulman, strategist at Salomon Bros., said that if there is a summer rally, gains should be “very modest.” Among the market highlights:

* Health care stocks returned to favor as investors sought safe-haven issues. Among drug firms, Syntex gained 1 3/8 to 35 3/4, Merck added 1 1/2 to 51, Pfizer was up 1 1/4 to 76 5/8, and Amgen rose 1 5/8 to 63 1/4.

Among other health care issues, U.S. Healthcare rose 1 3/4 to 53, Tokos Medical gained 1 1/2 to 29 1/2, U.S. Surgical added 1 to 102 3/8, and Genzyme leaped 2 1/2 to 49 3/4.

* Food stocks also were strong. General Mills rose 1 1/4 to 68 1/8, Gerber added 7/8 to 67 5/8, Hershey was up 3/4 to 42 3/4, and Wrigley jumped 1 3/4 to 78 3/4.

* In the loser’s column, many industrial issues fell back as investors expressed concern that the recovery has stalled. Alcoa dropped 1 5/8 to 73 1/2, Cummins Engine lost 2 1/4 to 64, Eaton sank 1 3/4 to 74 1/2, Dow Chemical dipped 1 3/8 to 54 7/8, and railroad CSX gave up 2 to 63 1/2.

Auto stocks were mixed, even though manufacturers’ reports pointed to a pickup in domestic car sales late last month. Chrysler rose 1/8 to 19 7/8, but GM dropped 3/8 to 40 3/4, and Ford fell 1 to 42 1/8.

* Among Southland issues, document-processing systems maker FileNet plunged 7 1/4 to 12 1/4 after it forecast sharply lower second-quarter earnings. Apparel maker Body Drama, which also reported lower results, closed unchanged at 5 1/4.

Cancer-treatment center operator Salick Health gained 1/4 to 10 1/2 after reporting quarterly per-share earnings up 14%.

Overseas, stocks slipped again in Tokyo. The Nikkei average fell 60.71 points to 16,657.07.

London stocks ended sharply lower, with the Financial Times 100-share average losing 28.1 points to close at 2,469.0. In Frankfurt, the DAX average lost 4.62 points to 1,772.36.

Early today in Hong Kong, the Hang Seng index plummeted 99.18 points to 5,925.59 after British and Chinese negotiators broke off talks on the financing of Hong Kong’s new airport. Analysts said the high-flying Hong Kong market was ripe for profit taking.

Credit

Short- and long-term interest rates eased further, as investors bid up bonds to lock in returns.

The price of the Treasury’s bellwether 30-year bond rose 1/8 point, or $1.25 per $1,000. Its yield slipped to 7.62% from 7.63% Thursday.

Despite continuing demand for bonds, traders said news of strong late-June car sales dampened the rally. The report hinted at latent economic strength.

The federal funds rate fell to 3% from 3.38% Thursday.

Currency

The dollar moved lower on light volume as traders awaited announcements from the economic summit in Germany.

The dollar closed in New York at 1.513 German marks, down from 1.517 Thursday, and 124.35 Japanese yen, down from 124.80.

Commodities

Soybean futures settled sharply lower on the Chicago Board of Trade, hitting six-month lows after heavy rain fell in the Midwest, dispersing worries about the crop.

Elsewhere, profit taking pushed energy futures lower on the New York Merc. Light, sweet crude oil for August slipped 21 cents to $21.89 a barrel.

On New York’s Comex, August gold fell 10 cents to $347.50 an ounce, and July silver edged down 0.7 cents to $4.02.

Market Roundup, D8