Dow and Yields Hit; Oil Highest Since Gulf War

Blue-chip stocks fell Wednesday on profit taking after setting two consecutive records, as Wall Street worried about rising long-term interest rates.

Meanwhile, the price of oil rose to its highest level since the Persian Gulf War, helping to aggravate inflation fears.

The Dow Jones industrial average ended down 51.18 points at 6,549.48, one day after finishing above the 6,600 level for the first time. The Dow also set a record on Monday.

Broader measures turned mostly negative with bonds by midafternoon, wiping out some modest morning gains.

“Some investors are looking for reasons to take profits, but at the same time some are looking for opportunities to put a little more money to work,” said Charles G. Crane, director of research at Spears, Benzak, Salomon & Farrell. “That’s why the volatility will continue to be as pronounced as it has been the last three to four weeks.”

There was little direction to Wednesday’s session until bond prices started slipping, sending the yield on the 30-year Treasury bond rising to 6.84%, up from late Tuesday’s 6.78% and the highest finish since late October.

The long bond’s yield has soared from 6.54% at the start of last week amid a flurry of unexpectedly strong economic data that raised doubts about whether the economy has slowed enough to keep inflation at bay.

With no major economic data released Wednesday, many investors were nervously awaiting Thursday’s reading on wholesale prices and Friday’s report on payroll and wage levels, which can have a strong impact on production costs and inflation.

But as crude oil futures shot higher amid a combination of concerns--cold weather, reports showing tight oil supplies and fears that Boris Yeltsin’s health problems will spur instability in Russia--bond prices began to deteriorate.

On the New York Mercantile Exchange, February heating oil futures rose 0.94 cent to 73.43 cents a gallon. February crude oil gained 39 cents to $26.62 a barrel.

In the broader market, declining issues led advances 1,272 to 1,238 on active volume of 556 million shares on the New York Stock Exchange.

The Nasdaq composite index lost 7.38 points to 1,320.35.

The Standard & Poor’s composite index of 500 stocks fell 4.82 points to 748.41. The American Stock Exchange index was up 1.09 points to 576.72.

The NYSE composite index of all listed common stocks fell 1.65 points to 395.25. The average share was down 17 cents.

Among Wednesday’s highlights:

* The biggest damage was incurred among popular blue chips, including IBM, down 3 1/2 at 159 7/8, and Procter & Gamble, down 2 at 109 1/8.

* Loewen Group fell 4 1/8 to 36 3/4 after Service Corp. International withdrew a $2.9-billion hostile offer. Service Corp. rose 1 3/4 to 29 3/8.

* A number of tech issues took big hits, including data communications equipment maker Shiva, which plunged 15 5/8 to 19 1/4 after reporting that its fourth-quarter earnings would be well below analysts’ estimates.

Netscape Communications tumbled 10 7/8 to 47 7/8 after Deutsche Morgan Grenfell downgraded the company.

* Templeton Russia Fund, the only NYSE-listed fund that trades exclusively in Russian companies, fell 1 1/8 to 23 on news that Yeltsin had been hospitalized after showing signs of pneumonia.

Overseas, Tokyo’s Nikkei stock average fell 1.1%, Frankfurt’s DAX index rose 0.7% and London’s FTSE-100 rose 0.2%.

Market Roundup, D5