Bank and Oil Stocks Grease Dow’s Skid : Market Overview

Highlights of Wednesday’s market activity, compiled from Times staff and wire reports:

* Bank and oil stocks, buffeted by critical analysts’ reports, helped drag the stock market lower. The Dow Jones average dropped back 12.97 points to close at 3,345.42.

* In the credit markets, Treasury bond prices moved sharply higher in technically driven trading as analysts speculated that the economy is prepared to take a turn for the worse. The Treasury’s bellwether 30-year bond yield, which moves in the opposite direction from its price, dropped to 7.62%, down from 7.69% late Tuesday.

Stocks

Bank stocks slumped after Smith Barney, Harris Upham analyst Alison Deans lowered ratings on J. P. Morgan, BankAmerica and Bankers Trust. Bank of New York stumbled 1 1/2 to 39 7/8 despite reporting a 40% increase in earnings to $87 million, or $1.05 a share.

“It appears that all the good news is already included in the price of the banking stocks,” said Edward Collins, executive vice president of institutional trading at Daiwa Securities America.

Oil stocks plunged after PaineWebber analyst Bryan Jacoboski reduced his opinion on 10 stocks, including Texaco, Amerada Hess and Mobil. Jacoboski said it’s doubtful oil and natural gas prices will rise much above current levels, so it’s difficult to be too optimistic about the near-term future of these stocks.

“The Smith Barney and PaineWebber reports knocked the stuffing out of the banking and oil stocks, but the overall market held in OK, and that’s impressive,” said Alfred Goldman, market analyst at A. G. Edwards & Sons.

Among the market highlights:

* TRW gained 1 3/8 to 56 3/8 after reporting a 150% increase in second-quarter earnings to 93 cents a share from 39 cents. AMR rose 1 3/8 to 65 1/2 even though the company reported a loss of $166 million, or $2.21 a share.

* On the other hand, Georgia-Pacific fell 3 3/4 to 52 1/4 after the company said it reported break-even earnings in the second quarter. The company earned $29 million, or 34 cents a share, in the prior year.

* Other paper and forest-products issues also declined broadly. Louisiana-Pacific lost 1 3/8 to 42 1/8; International Paper 2 1/2 to 64, and Weyerhauser 7/8 to 31 3/4.

* Ameritech, up 1/8 to 67, traded at its highest price in more than a year after the company posted second-quarter profits of $1.28 a share, up from $1.15 a share in the second quarter of 1991.

* Other Baby Bell regional telephone issues that advanced along with Ameritech included Southwestern Bell, up 3/4 to 64 3/8; Pacific Telesis, up 5/8 to 42 1/4; Bell Atlantic, up 1/4 to 47 1/8, and Bell South, up 1/8 to 52 5/8.

* Coca-Cola fell 1 to 40 1/2 on concerns about declining sales growth in some markets in the second quarter.

* Microsoft climbed 3/8 to 71 1/2 after the software giant outlined plans to work with Apple Computer to develop Microsoft software applications to run on Apple’s next-generation Macintosh computer, the Power PC.

In the broader market, advancing issues outnumbered declines by about 9 to 8 on the New York Stock Exchange. Big Board volume came to an estimated 208.31 million shares, up from 195.57 million on Tuesday.

Traders took to the sidelines in Frankfurt ahead of the Bundesbank council meeting, uncertain what the central bank would do to curb money supply growth. The DAX-30 index closed 0.52 points ahead at 1,734.62.

Share prices also were little changed on the London stock exchange with the Financial Times 100-share average closing up 2.4 points at 2,486.4.

In Tokyo, the Nikkei 225-share average closed firmer, 52.29 points up, at 17,116.92.

Credit

The price of the Treasury’s bellwether 30-year bond rose 25/32 point, or $7.81 per $1,000 in face amount, at closing.

Bond market analysts lacked a solid explanation for the market’s sudden surge in late afternoon trading.

“There was not a single reason . . . that was catalytic,” said Elliott Platt, research director for Donaldson, Lufkin & Jenrette Securities Corp.

A round of technical trading in bond futures in Chicago markets contributed to the late rise in prices, analysts said. Platt said some traders were re-evaluating the possibility of a Bill Clinton presidency after selling treasuries earlier in the week.

The federal funds rate, the interest on overnight loans between banks, rose to 3.375%, up from 3.188% late Tuesday.

Currency

The dollar declined against most major foreign currencies in trading dominated by speculation about a meeting of Germany’s central bank. Gold prices rose.

At the close in New York, the dollar was quoted at 1.481 German marks, down from 1.485 marks the day before. The dollar fetched 125.10 Japanese yen, the same as late Tuesday’s level.

Commodities

Wheat futures prices rose strongly, the third day of a rally rooted in rising export demand and fieldwork delays as the winter wheat harvest draws to a close.

On other commodity markets, oil futures rose; precious metals were mixed, and livestock and meat futures were mostly lower.

Wheat for July delivery rose 8.75 cents to settle at $3.49 a bushel. The contract has gained 14 cents this week.

Meanwhile, oil futures rose on the New York Mercantile Exchange with light, sweet crude oil for August delivery rising 25 cents to $21.71 a barrel.

On New York’s Commodity Exchange, August gold rose $2.90 to $354.70 an ounce, and July silver rose 0.2 cent to $3.94 an ounce.