Dow Adds 51 in Mixed Market; Dollar Declines

Stocks closed mixed but mostly higher Thursday, despite giving up much of a sharp midday rally.

Meanwhile, the dollar continued to decline against key currencies, closing at its lowest level in a month against the Japanese yen.

On Wall Street, the Dow Jones industrial average continued to swing wildly, rising as much as 130 points by midday after diving 140 points Wednesday. Late profit taking trimmed the Dow’s gain to 50.97 points, for a close of 7,136.62.

In the broad market, winners topped losers by 14 to 11 on the New York Stock Exchange, while losers had a slight edge on Nasdaq. The Nasdaq composite index added 7.92 points to 1,330.83, while the Russell 2,000 index of smaller stocks slipped 0.12 point to 360.10.

Analysts were at a loss to explain much of Thursday’s action. Indeed, many Wall Streeters had expected stocks to sell off, after the chairmen of Congress’ tax-writing committees late Wednesday said they expect to make Wednesday the effective date for any capital gains tax cut.

The tax cut, to which President Clinton and Republican leaders agreed in principle last week, still must be detailed. But it is expected to slash the top rate on long-term capital gains from the current 28% to about 20%.

By indicating that they expect any asset sales from here on to qualify for the lower rate, the tax-writing chairmen were telling investors, in effect, that they needn’t hold up any planned transactions.

But the news didn’t trigger any torrent of selling Thursday, as some analysts had predicted. Many financial advisors are warning clients that the tax cut still isn’t a done deal, so that may be causing some caution on investors’ part.

“Some people who have built up some big capital gains in recent years would have been expected to unload,” said Robert Froehlich, chief investment strategist for Kemper Funds in Chicago. “Maybe the market is skeptical that the deal will never get done.”

Fundamentally, stocks were helped Thursday by a stronger bond market. Yields eased on news of a slowdown in retail sales in April. The Treasury bond yield slipped to 6.93% from 6.96% on Wednesday, after rising as high as 6.99% early in the day.

And the dollar’s sudden weakness doesn’t appear to be spooking stock or bond investors so far.

The dollar fell below 124 yen for the first time in a month after Eisuke Sakakibara, a top official in Japan’s Finance Ministry, told Parliament that the dollar is weakening and may fall as low as 103 yen, Jiji Press reported.

The dollar slumped to 123.77 yen in New York from 125.13 on Wednesday. Early today in Asia, it was trading at 122.70.

The dollar also lost ground against the German mark.

A weaker dollar could help U.S. exporters, but it also might encourage foreign owners of U.S. bonds to dump them, analysts warn.

Among Thursday’s highlights:

* IBM led the Dow higher, gaining 5 1/4 to 167 3/8 after Chairman Louis Gerstner gave an upbeat presentation to analysts.

* Also in the tech sector, computer networkers were strong. Cisco Systems gained 2 5/8 to 61 3/8 and 3Com rose 1 1/4 to 38 3/8.

* Oil issues rallied as crude prices jumped on concern that a strike at an oil export terminal in Nigeria could disrupt exports from the fifth-largest supplier to the U.S. Atlantic Richfield gained 2 5/8 to 145 3/4 and Unocal added 1 1/2 to 40 7/8. (Investor Spotlight, D7.)

* Retail stocks were mostly higher despite mixed April sales reports. Wal-Mart jumped 1 to 29 1/4, May Department Stores was up 1 1/4 to 46 1/2 and Costco surged 2 3/8 to 31 7/8.

* GCR Holdings, a property and casualty insurer, rose 4 7/8 to 27 1/4 after rival Exel agreed to buy it for 27 a share. Exel jumped 3 3/4 to 43 3/8.

Overseas, London’s FTSE-100 sock index closed up 42.9 points at a record high of 4,580.4 after being down about 20 points at its worst.