STOCKS : Dow Slumps 22.58 on Wave of Profit Taking

Blue chip stock prices dropped sharply Wednesday as profit takers took another bite out of Monday’s jump to a record high close.

The Dow Jones industrial average ended 22.58 points lower at 3,005.37. On Tuesday, stocks fell 7.38 points after Monday’s spike to a record close of 3,035.33.

In the broader market, 672 issues rose, 891 declined and 483 issues were unchanged in nationwide trading of New York Stock Exchange-listed stocks.

Big Board volume came to 186.56 million shares, against 180.46 million Tuesday.

A bad day in the bond market contributed to Wednesday’s drop, and program traders also weighed in with sell orders.

“I don’t think this is unusual at all,” said Ron Doran, director of institutional trading at C. L. King & Associates. “We’re seeing some profit taking and some programs.”

Investors dumped bonds--sending interest rates up--after Federal Reserve Board Chairman Alan Greenspan suggested that the economic rebound may be stronger than expected.

Greenspan said economic data released in the past 10 days shows the economy is “moving toward first stability and some recovery.”

But it is “not yet at the point” where it clearly is in an upswing, Greenspan told reporters in Osaka, Japan, where he was attending a conference with other central bankers. He also said he expected that inflation coming out of the recession will be lower than before the beginning of the downturn.

“That probably means no further cut to the discount rate,” said Robert Stovall, president of Stovall/21st Securities. “A lot of people had been saying that if the economy continued to be sluggish, the Fed would cut rates one more time. That (Greenspan comment) put bonds under pressure all day.”

Investors may also be growing cautious ahead of Friday’s jobs data for May, traders said.

Among the market highlights:

* Industrial stocks, recent stars, continued to fall back in profit taking. Ingersoll Rand lost 1 3/8 to 51 5/8, Parker Hannifin fell 1 3/8 to 28 1/2, Magnetek slipped 1/2 to 13 7/8, Reynolds Metals dropped 1 1/4 to 62, and GE gave up 1 1/4 to 75 5/8.

* Goodyear Tire soared again, adding 1 1/4 to 31 3/8. Paine Webber repeated an “attractive” rating on the stock in response to Tuesday’s announcement of a new chairman, Stanley Gault.

* Pacific Enterprises, parent of Southern California Gas and Thrifty Drug, fell 1 5/8 to 29 3/8. Analysts at Dean Witter, Prudential and First Boston lowered their earnings estimates after the company cut its dividend 50%.

* Intel tumbled 4 to 53 3/4. Despite introducing a new computer chip, the stock was hit as a Wertheim Schroder analyst warned of weaker chip prices ahead.

* Time Warner lost 6 1/4 to 110 3/4 on reports that the company plans to offer stock to the public to ease its debt load. The media giant declined comment.

* Nursing home operator Beverly Enterprises gained 1 to 11 3/8 after a Kemper Securities analyst reiterated a buy rating.

* Blockbuster Entertainment added 3/8 to 9 7/8. The firm said it is mulling a $100-million stock buyback.

* Among Southland issues, consumer-products firm DEP Corp. rocketed 1 3/8 to 8 3/8 after a surprisingly strong earnings report Tuesday. Disk-drive maker Micropolis plunged 2 1/8 to 11 after analysts cut earnings estimates. Highway construction firm Kasler slipped 3/8 to 14 1/2 despite reporting sharply higher quarterly earnings.

Also, food distributor Rykoff-Sexton jumped 1 1/4 to 21 3/8 one day after grain processor Archer Daniels Midland said it has a 5.2% investment stake in the firm.

In overseas action, a surge of investor enthusiasm for pharmaceutical shares powered London stocks to a strong finish, with the Financial Times 100-average closing 15.5 points higher at 2,521.5.

German shares jumped to the highest close in nearly 10 months. The DAX average closed up 27.38 points at 1,712.76.

In Tokyo, stocks finished at their lowest level since February, with the Nikkei 225-share average closing down 267.29 points at 25,289.57.

Credit

Treasury bond prices fell after Fed Chairman Greenspan’s optimistic comments on the outlook for economic improvement.

The price of the Treasury’s 30-year bond fell 9/16 point, or $5.63 per $1,000. Its yield jumped to 8.39% from 8.34% Tuesday, its highest level since mid-March.

When the economy appears to be recovering, the Federal Reserve is less likely to move interest rates lower to stimulate business activity. Lower rates benefit fixed-return securities such as bonds, boosting their prices.

Greenspan’s comments were “perhaps a watershed statement by the Fed leader,” said William V. Sullivan, director of money market research at Dean Witter Reynolds.

“It seemed to suggest the Fed was putting a lot of credence in recent statistics and that any chance of any easing in Fed policy was eliminated,” Sullivan said.

The federal funds rate, the interest on overnight loans between banks, fell to 5.67% from 5.81% late Tuesday.

Currency

The dollar strengthened on optimism over improvement of the U.S. economy.

“The recent numbers showing a net rebound in the U.S. economy are giving the dollar support,” said Earl Johnson, analyst at Harris Trust in Chicago.

Johnson and other traders said the dollar firmed after Greenspan’s comments on the economy. But traders remained cautious in advance of the unemployment report.

A stronger U.S. economy would tend to bolster the dollar’s value because it implies that domestic interest rates will stabilize or rise, which makes dollar-denominated investments worth more.

In New York, the dollar ended at 1.749 German marks, up from Tuesday’s close of 1.745. It closed at 139.30 Japanese yen, up from Tuesday’s 138.85 yen.

Commodities

Copper futures prices rose for the fourth straight day, extending a recovery aided by labor discord at a large Chilean copper mine.

Copper futures settled 0.1 to 1.9 cents higher on New York’s Commodity Exchange, with the contract for delivery in June at $1.01 a pound, its highest settlement since May 21.

June copper traded at 96 cents a pound, a 33-month low, as recently as Friday amid reports of abundant warehouse supplies of the metal.

Analysts said the market’s behavior this week mainly reflected buying by speculative fund managers who base trading decisions on technical chart patterns rather than supply-and-demand fundamentals.

Elsewhere the Comex, gold settled 10 cents lower to 30 cents higher, with June at $362.60 an ounce; silver was 2.5 to 2.8 cents higher, with July at $4.19.

Light, sweet crude oil for delivery in July settled at $20.47, down 55 cents on the New York Mercantile Exchange.

Market Roundup, D6