Dow Slips 3.51 in a Mixed Session : Market Overview

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

* Blue chip stocks finished with spotty losses in mixed trading after the market made an early attempt at a rally. The Dow Jones industrial average, up about 10 points in the early going, closed with a 3.51-point loss at 3,282.20.

* Long-term Treasury bond prices rose, extending a rally from last week. But shorter-term securities prices fell as traders awaited new supplies. The yield on the Treasury’s main 30-year bond, which falls when the price rises, fell to 7.51% from 7.57% late Friday.

Stocks

Before the trading week began, the Bank of Japan cut its discount rate from 3.75% to 3.25%, seeking to counter that nation’s economic and financial problems.

While the news was welcomed by stock traders, analysts said it came as no great surprise, and left many questions unanswered about the international business outlook.

In the United States, meanwhile, analysts say corporate earnings reports for the second quarter overall have shown the kind of improvement investors have been hoping for.

But individual profit disappointments have garnered most of the attention, prompting sharp declines in the stocks of the companies in question.

Advancing issues outnumbered declines by about 9 to 8 on the New York Stock Exchange. Big Board volume came to 164.70 million shares, down from 163.89 million on Friday.

Among the market’s highlights:

* Royal Appliance Manufacturing rose 1 1/8 to 9 7/8. The stock plunged 12 1/2 points Friday after the manufacturer of vacuum cleaners jolted investors with word of sharply lower earnings for the second quarter.

* Boeing fell 1/2 to 39 1/4. The company reported flat second-quarter profits and said it expected lower sales and earnings in the second half of the year.

* Other losers among the blue chips that make up the Dow included Philip Morris, down 5/8 at 76 7/8; American Express, down 3/8 at 22 3/4; Exxon, down 3/8 at 62; International Paper, down 1/2 at 62 3/4, and International Business Machines, down 3/8 at 92 3/8.

* Stone Container tumbled 3 to 18 1/4. The company reported a $41.20-million loss for the second quarter and omitted its cash dividend, declaring a 2% stock payout.

* Marvel Entertainment climbed 1 3/4 to 35 1/8 and Fleer Corp., traded in the NASDAQ market, rose 1/8 to 28 1/8. On Friday, Marvel agreed to acquire Fleer for $28 a share.

* Horizon Industries, another NASDAQ issue, jumped 5 to 13 3/4. Mohawk Industries announced plans to acquire Horizon for $10 a share in cash plus stock valued at another $5 per share.

* Utility issues, which have been benefiting from renewed declines in interest rates, dominated the list of NYSE issues reaching new highs for at least the past 52 weeks. Houston Industries gained 1/8 to 45 1/2; New England Electric 3/8 to 35 1/2; Southern Co. 3/8 to 36 7/8; Minnesota Power & Light 3/8 to 33 1/8, and Public Service of Colorado 1/4 to 27 3/4. Entergy was unchanged at 30 1/4.

* Analysts said drug stocks provided one of the few areas of investor interest. New issue Wellcome topped the NYSE actives list, ending at 15 1/4 on about 14 million shares. Twenty-five percent of a global offering of 270 million shares of the British pharmaceutical company was issued in the United States.

Salomon Bros. initiated coverage of Warner-Lambert Co. and Schering-Plough Corp. with buy ratings. Warner-Lambert rose 1 3/8 to 67 7/8 and Schering-Plough added 1 3/8 to 59 3/8.

In overseas trading, the Tokyo stock exchange shrugged off a half-point cut in the Japanese discount rate Monday and dropped to a new six-year low on the leading price index. The 225-share Nikkei average ended 124.45 points or 0.80% lower at 15,373.34 after an early technical rally lost momentum and kicked into reverse, brokers said.

London shares closed sharply lower, with investors depressed by weekend media comment on the state of the British economy. The Financial Times 100-share average ended down 29.2 points at 2,348.0.

A spurt in the last hour of trading wiped out an early dip on the Frankfurt exchange. The 30-share DAX average ended at the day’s high of 1,618.09 points.

Credit

Michael Moran, chief economist at Daiwa Securities America Inc., said the market remained firm after a rally last week that carried the long bond higher as attitudes about the economy appeared to change.

“There are many investors that apparently are shifting their views on the economy and are less optimistic for growth prospects and more optimistic for inflation prospects,” Moran said.

A weakening economy and low inflation help the bond market.

The price of the Treasury’s long bond gained 23/32 point, or $7.19 per $1,000 in face amount.

There was little reaction to a larger-than-expected 2.9% drop in the sale of existing homes in June, or to the Bank of Japan’s reduction in its discount rate.

Many participants are awaiting the release of fresh economic data later this week. The government is scheduled to issue reports on jobless claims and new home sales on Thursday.

Shorter-term issues were lower ahead of this week’s note auction. The Treasury will sell $15 billion in two-year notes today, followed by the auction of $10.5 billion in five-year notes on Wednesday.

The federal funds rate, the interest on overnight loans between banks, was quoted at 3.25%, up from 3% late Friday.

Currency

The dollar settled lower on world currency markets in typically light summer dealings.

Trading was quiet, but dealers were disappointed that the dollar could not continue to climb after posting gains late last week. But there was little to lend direction to the market--the next batch of statistics on the U.S. economy is not scheduled to be released until later in the week.

Marc Chandler, an analyst with the advisory firm IDEA, said fear of central bank intervention prevented the dollar from falling too far. Last week, monetary authorities stepped in to prop up the U.S. currency.

The Japanese yen was under pressure for most of the session following the Bank of Japan’s move overnight to trim the discount rate half a percentage point to 3.25%.

Chandler said many market participants, who fear the move won’t be sufficient to stimulate the Japanese economy, anticipate still lower interest rates, which would be favorable for the dollar. When rates decline overseas, yields on fixed-income investments at home are more attractive to investors.

In New York, the dollar settled at 127.50 yen, down from 128.10 yen Friday. The dollar also fell to 1.481 German marks from Friday’s 1.504.

The British pound rose to $1.919 in New York from Friday’s $1.8945.

Commodities

Coffee futures fell sharply on New York’s Coffee, Sugar & Cocoa Exchange as a weekend of mild weather in Brazil led to aggressive selling by speculators.

Also weighing on the market was the belief that little progress will be made in International Coffee Organization talks underway in London.

On other markets, grain and soybeans were mostly higher, livestock and meat were mixed, precious metals fell and energy futures rose.

Coffee for delivery in September set a life-of-contract low, settling 4 cents lower at 56.10 cents a pound.

September light, sweet crude was 6 cents higher at $22.04 a barrel.

Precious metal futures fell on New York’s Commodity Exchange on profit taking, with August gold settling $1.40 lower at $357.90 an ounce; July silver was 1.9 cents lower at $3.947 an ounce.

Market Roundup, D10