Stocks Mixed; Bond Yields Back Below 7%

Smaller-company stocks set a new high for the fifth straight session, but blue chips stumbled Thursday as a warning from Nike fed fears that company profits won’t justify the market’s lofty levels.

The Dow Jones industrial average fell 27.05 points to 7,330.18. It has now slipped by about 53 points since reaching its record-high close of 7,383.41 on Tuesday .

The Nasdaq market succumbed to some profit taking, particularly among bellwether technology shares, after closing at record highs for three straight sessions. It closed down 7.14 points at 1,403.04.

Technology stocks had provided much of the market’s recent strength. IBM tumbled 2 1/4 to 87 7/8, and the shares of computer-networking companies also got clobbered after big recent gains.

“A lot of these tech stocks had made ferocious runs in a very volatile market,” said Scott Bleier, chief investment strategist at Prime Charter Ltd. “Wall Street always tends to go to extremes, and there’s always a snapback afterward.”

Among networking stocks, 3Com fell 3 5/16 to 47 3/16, after rising nearly 10 points in the last week. Ascend Communications lost 2 3/4 to 56 5/8 after a similar run.

“When you get up this high, there isn’t much room for disappointment, and you saw that today,” said William M. Lefevre, senior market analyst at Ehrenkrantz King Nussbaum, noting Nike’s discouraging profit forecast. “But I don’t think this is a peak. The market is right now in a pause--a mini-consolidation from a pretty good run.”

The broad market displayed a more positive tone than the blue-chip sector, with advancing issues outnumbering those that fell and the Russell 2,000 list of smaller companies closing at a record high for the fifth straight session, at 378.43, up 0.64 point.

Bond yields dipped below 7% on Thursday for the first time in three days as prices rose in reaction to a successful auction of five-year notes. The yield on the benchmark 30-year Treasury bond fell to 6.97%.

The Treasury sold $12 billion of 6.5% notes at a discounted 6.616%, the lowest yield since Feb. 26. Dealers were relieved that the notes sold well after Wednesday’s disappointing auction of three- and six-month notes.

“There was strong demand for the five-year note and some relief that we’re finished with supply here,” said Paul Kasriel, an economist at Northern Trust Co. in Chicago, “but I think really we’re marking time until next week, when we get the [National Assn. of Purchasing Management] report on Monday, and of course the monthly lottery also known as the employment report.”

The purchasing managers trade group is scheduled to release its survey of business activity Monday morning. The Labor Department will release May job-creation and unemployment data at the end of next week.

Among Thursday’s highlights:

* Gucci Group fell 5 7/8 to 68 1/2. The luxury-goods maker told analysts April sales were hurt by the weak Japanese yen.

* General Motors dropped 1 to 56 3/4 after its chairman and chief executive, blaming the effect of labor strikes, said the auto maker won’t reach its goal of increasing its share of the U.S. car market to 33% in 1997. The CEO did say he expects GM’s share to rise from the 31.3% of last year, a post-World War II low.

* Boeing rose 2 to 105 5/8 after Merrill Lynch said the stock will probably rally after having lagged the market so far this year. Analyst Byron Callan forecast an end-of-the-year target of $115 a share, and a price of $125 by 1998’s close.

* Southwest Airlines fell 7/8 to 25 7/8 after Chief Executive Herbert Kelleher said the 10% airline ticket tax reinstated this year will “make it very difficult for Southwest Airlines to surmount its earnings of last year,” which amounted to a record 56 cents a share for the second quarter of 1996. Analysts had expected 60 cents for the current second quarter.

Overseas, Tokyo’s Nikkei-225 stock average fell 0.2% and London’s FTSE-100 fell 0.1%. Germany’s financial markets were closed for a holiday.

Soybean prices soared Thursday as processors scrambled to secure dwindling stocks, and coffee prices hit the highest levels in 20 years on worries about supplies.

At the Chicago Board of Trade, soybeans for delivery in July closed 20 cents a bushel higher at $8.69 1/2 after jumping the allowable 30-cent daily trading limit early.

At the Coffee Sugar and Cocoa Exchange in New York, the sizzling rally in coffee prices carried into a third straight session with prices shattering the $3-a-pound barrier.

Coffee for July delivery closed up 19.25 cents a pound, or 6% higher at $314.80, after rising as high as 318 cents, the highest price for coffee on the exchange in two decades.

“We are seeing history happen,” said Christian Wolthers, vice president of Miami-based importer Blaser & Wolthers Specialty Coffee Trading Co. “We’ve not seen a market move like this without frost, drought or any other kind of tragedy. It is a clear situation of short supply for demand.”

The latest fear among traders is that as cold weather sets in during the Brazilian winter next month, coffee trees could be damaged, as they were during a frost in June 1994.

On Wednesday, the Brazil Specialty Coffee Assn. said it estimates this year’s harvest will reach 21.74 million 132-pound bags, compared with 27 million last year.