STOCKS : Dow Tumbles 32 on Profit Taking

Wall Street’s second quarter got off to a rocky start Monday as traders took profits in thin post-holiday trading and pushed blue chip stocks more than 1% lower.

The Dow Jones industrial average closed down 32.67, or 1.1%, at 2,881.19.

But the drop came during a post-holiday lull, with most of Europe closed for Easter Monday and many traders absent.

In the broader market, declining issues outnumbered advances by about 3 to 2 in nationwide trading of New York Stock Exchange-listed stocks, with 637 up, 979 down and 445 unchanged.

Meanwhile, the small-stock market was barely scratched: The NASDAQ composite index of smaller issues dipped 1.44, just 0.3%, to 480.86.

Some big-name high-tech stocks were hit after analysts downgraded earnings estimates on Digital Equipment Corp. But even there the damage was limited, and traders said there was nothing to suggest any wholesale movement out of the stocks.

The Dow index was hurt by sharp declines in two key stocks: IBM, off 1 5/8 to 112 1/4 in sympathy with DEC, and Philip Morris, down 1 3/8 to 66 5/8 partly on congressional allegations of milk price-gouging.

The market showed little reaction to news that the March purchasing managers index rose to 40% from 38.5%, indicating that the economy, while still in recession, may be heading for a rebound.

Among the market highlights:

* DEC tumbled 4 1/4 to 63 7/8 after analysts at Sanford C. Bernstein, Merrill Lynch, Smith Barney and Kidder Peabody cut their estimates on the nation’s second-biggest computer maker. DEC confirmed that it has seen some softness in orders recently.

Among other major tech stocks, Compaq slipped 1 to 61 5/8 and Hewlett-Packard fell 1 1/8 to 48 7/8. But there was significant strength in other issues, including AST Research, up 2 1/2 to 29 3/4; Intel, up 3/4 to 47 1/2, and Novell, up 1 3/4 to 52 1/4.

* Health-care stocks, some of the hottest issues in the first quarter, gave ground in profit taking. U.S. Healthcare dropped 2 to 50 1/2, National Medical Enterprises fell 1 1/2 to 48 1/4, Amgen slid 2 1/2 to 128 3/4 and Salick Health lost 1 1/8 to 10 1/8.

Bucking the trend was Santa Barbara-based Mentor, a medical-devices firm, which rose 1 3/8 to 28 7/8. Also, L.A.-based drug firm Medco Research was flat at 14 3/4 after reporting a small quarterly profit versus a loss a year ago.

* Utility stocks in general were weak. Southwestern Bell lost 1 1/4 to 54 7/8 after raising its dividend 2.9%, a disappointing increase.

* In-Store Advertising, one of the most disastrous new stock offerings of 1990, plunged 1 1/8 to 4 5/8 after reporting a bigger-than-expected fourth-quarter loss of 72 cents a share.

* Among smaller Southland issues, Encino-based Medical Properties, a real estate investment trust, dropped 1/2 to 4 7/8 after cutting its quarterly dividend to 18 cents from 30 cents. It cited a need to conserve cash.

Digital Sound, a Carpinteria-based voice-mail equipment maker, jumped 10/32 to 2-14/32, continuing its recent rebound on speculation about a sales turnaround.

Frederick’s of Hollywood, another strong stock of late, rose another 1 3/4 to 24 1/8. And L.A.-based Western Waste Industries, which began trading on the NYSE on Monday, was flat at 18 1/4.

In Tokyo, stocks closed lower, with prices dropping mainly due to a reluctance to trade. The Nikkei index fell 284.64 to close at 26,007.40.

Credit

Treasury bond prices were mixed in light trading as strategists ignored two new reports describing a still-sluggish economy.

The Treasury’s key 30-year bond fell 3/16 point, or $1.88 per $1,000 in face amount at closing. Its yield inched up to 8.25% from 8.24% last Thursday.

There was no U.S. bond trading on Good Friday, when most financial institutions were closed.

The federal funds rate, the interest on overnight loans between banks, rose to 6.50% from 6.0625% late Thursday.

Currency

The dollar closed lower in very thin trading as technical influences of supply and demand ruled the market in the absence of any substantive news developments.

European markets were closed for the Easter Monday holiday, and the dearth of overseas trading dampened New York activity.

The dollar closed at 1.672 German marks in New York, down from 1.697 Friday. It also finished at 139.35 Japanese yen, down from 140.60 yen late Friday.

Commodities

Corn and soybean futures prices soared in hectic trading after a government report said U.S. farmers intend to plant fewer acres of those crops than most experts had predicted. Wheat futures also rose sharply.

Analysts attributed much of the buying on the Chicago Board of Trade to speculative commodity funds that bet wrong on last Thursday’s Agriculture Department crop report and had to buy contracts to cut their losses.

Wheat futures settled 6.25 to 7.25 cents higher in Chicago, with the contract for delivery in May at $2.937 a bushel; corn was 4.50 to 8.25 cents higher, with May at $2.572 a bushel. Soybeans jumped 22.25 cents to 24.25 cents, with May at $5.985 a bushel.

Gold was $3 to $3.30 higher, with April at $360.40 an ounce; silver was 9.2 to 9.9 cents higher, with May at $3.96 an ounce.

Market Roundup, D10