FINANCIAL MARKETS : Dow Dips 1.62 as Consumer Firms Decline : Market Overview

The stock market ended lower as jittery investors for a third day unloaded the issues of famed consumer-product companies, which are believed to be facing stiff competition from generic brands.

* The government’s long-term Treasury bond yield fell below 7% in quiet trading.

* The dollar ended a four-day free fall against the yen as repeated buying of dollars by the Bank of Japan finally curbed the trend in a holiday-hushed market.

Stocks

Trading was choppy, with the Dow industrials moving higher and lower for much of the day, while the broader indexes stayed mostly in negative territory.

The Dow Jones average fell 1.62 points to 3,377.57 on Big Board volume of 293.68 million shares, down from late Monday’s 296.08 million. In the broader market, declining issues outnumbered advances by about 6 to 5 on the New York Stock Exchange.

Among the trading highlights:

* Stocks sliding Tuesday read like a Who’s Who of consumer-goods companies: Coca-Cola fell 1 to 40, Procter & Gamble lost 5/8 to 46 3/4, and Colgate-Palmolive dropped 2 1/8 to 60.

Consumer issues began their slide on Friday, when Philip Morris--previously the most widely held institutional stock--lost 23% of its value after forecasting poor 1993 earnings and announcing cigarette price cuts.

* In part, generic cigarettes, which cost less, had cut into Philip Morris’ profit. Shares of tobacco companies fell again Tuesday after rising slightly a day earlier. Philip Morris fell 1 3/4 to 48 1/8, while RJR Nabisco lost 3/8 to 6.

Investors were questioning whether other consumer stocks, which had led the stock market higher over the last decade, were also being hurt by no-name brands and whether they could continue to produce the same huge profits.

* Retail stocks followed the consumer issues lower. Among them, Wal-Mart Stores lost 2 to 27 3/4 in heavy trading, and Home Depot dropped 3 5/8 to 55 5/8.

Brands and retail companies are also under pressure because personal income and job growth are not rising enough, said Michael Metz, investment strategist with Oppenheimer & Co. That means consumers aren’t willing to spend as much.

But Alfred Goldman, director of technical market analysis with A.G. Edwards & Sons Inc. in St. Louis, said that despite the concern surrounding consumer stocks, he did not expect the market to fall too far.

“I don’t expect Armageddon,” Goldman said, pointing to the substantial amounts of cash looking for a home. In addition, the low interest rates make stocks more attractive as investors look for the best return on their money.

Trading was moderate as investors wound down for the Passover and Easter holidays this week. The markets will be closed on Good Friday.

* More earnings disappointments sent shivers through the market. Policy Management Systems, the computer software company, plunged 36 1/4 to 47 5/8 after saying first-quarter earnings will be about 39% lower than expected. In NASDAQ trading, Caere Corp., the software company, fell 5 to 8 1/2 after announcing poor earnings.

* U.S. Surgical dropped 4 to 48 5/8 after an analyst downgraded the stock over concerns about profit margins.

* Auto stocks were among those gaining after the companies reported solid March auto sales data. Ford rose 2 to 54, Chrysler jumped 1 3/4 to 41, and General Motors rose 5/8 to 38 3/8.

In overseas trading, Tokyo’s 225-share Nikkei average finished down 272.66 points at 19,486.80 on heavy volume. In Frankfurt, the DAX-30 share average ended at 1,665.40, up 6.71 points, and London’s Financial Times 100-share average lost 6.6 points to close at 2,832.2.

Credit

The drop in the Treasury’s long-bond yield represented a follow-through to strong trading on Monday. The market was also helped by a report that the Treasury Department was considering reducing the amount of long-term debt securities it issues.

The 30-year bond’s yield slipped to 6.96% from Monday’s 7.02%. Its price, which moves in the opposite direction from its yield, rose 25/32 point, or $7.81 per $1,000 in face value.

Short-term yields also retreated.

Trading was influenced by a report by a research firm that said the government plans to cut back on the sale of long-term bonds.

The report, by Stone & McCarthy Research Associates Inc. of Princeton, N.J., said the Treasury’s advisory panel on debt-management strategy is expected to propose cutting back the issuance of longer-dated debt securities when it issues recommendations in May.

Fewer securities would increase demand, boosting prices.

John Canavan, a market analyst with Stone & McCarthy, said the report said the panel was considering eliminating the seven-year note, cutting issuance of the five-year note by 20% and issuance of the 30-year bond in half.

“It basically seems to be a political trial balloon,” Canavan said.

Analysts also cited weakness in the Commodities Research Bureau price index Tuesday, lowering inflation fears among bond market participants. Inflation erodes the value of securities with a fixed income.

Trading was light, with some dealers absent in observance of Passover.

The federal funds rate, the interest on overnight loans between banks, was 2.0%, down from 3.0% late Monday.

Other Markets

The dollar bounced off recent lows in light trading.

“Japanese officials have said that a strong yen is good, but they don’t want it to move up too fast because that’s a detriment to Japanese companies already having problems with exports,” a U.S. bank dealer said.

However, currency dealers believed that the dollar’s recovery will be brief, as Japanese Prime Minister Kiichi Miyazawa wants to present a strong yen to President Clinton in their meeting in Washington next week. A stronger yen would make U.S. exports cheaper to Japanese consumers.

Clinton has been pressuring Japan to slash its huge trade surplus with the United States, which ballooned to $6.15 billion in the first 20 days of March from $4.37 billion in February.

In New York, the dollar closed at 113.85 yen, up from its postwar low of 113.70 reached late Monday. The dollar also advanced against the German mark, rising to 1.611 marks from Monday’s 1.595.

Meanwhile, crude oil futures took a tumble on New York’s Mercantile Exchange on concerns that output by OPEC nations will remain high while demand is falling. Light, sweet crude oil for May delivery settled 32 cents lower at $20.30 a barrel.

Gold retreated for the second straight day. On the Commodity Exchange in New York, gold for current delivery fell $1.60 an ounce to close at $337.90. Silver also declined, falling 6.2 cents an ounce to $3.845.

Market Roundup, D6