FINANCIAL MARKETS : Blue Chips Extend 4-Day Run

Market Overview

A roundup of Tuesday’s market activity, compiled from staff and news service reports:

* Blue chip stocks extended their winning streak to a fourth session, buoyed by gains in banking shares and record earnings by Merrill Lynch & Co., the nation’s largest brokerage house. The Dow Jones industrial average rose 15.94 points to 3,444.03.

* The price of the government’s key long bond rose, but intermediate notes ended slightly lower amid lackluster demand for the Treasury’s newly auctioned seven-year security.

Stocks

Advancing issues outnumbered declines by about 7 to 4 on the New York Stock Exchange. Volume on the floor of the Big Board came to 286.7 million, up from 261.5 million in the previous session.

The Dow Jones transportation average ended at a record high for the third time in four sessions, up 11.68 to 1,660.52.

The market shrugged off a disappointing report on March retail sales. The weak sales, however, were in large part attributed to the bad weather during the month, including a massive East Coast snow storm.

The report moved bond prices higher, pushing down yields again to near record-low territory. Falling bond yields help stocks because investors look to equities for a better return on their money.

Another factor moving the market Tuesday was strength in overseas markets.

In Tokyo, the 225-issue Nikkei stock average soared 858.15 points, or 4.32%, closing at 20,740.29. It was the first time the Nikkei closed above the 20,000 mark in more than a year. Stocks jumped after the Japanese government approved a 13.2-trillion yen fiscal package.

Stocks also rose in Europe. London share prices closed firmer, with a solid 25-point gain on the Financial Times-100 index to 2,846.8. In Frankfurt, the 30-share DAX closed 15.32 points higher at 1,671.05.

In addition to Merrill Lynch, companies reporting solid earnings included Tenneco, Motorola and Coca-Cola. But in this jittery market, not all saw their stocks end higher in response.

Among the trading highlights:

Coca-Cola shares were higher for most of the day, then fell late in the session, ending down 1/4 to 39 1/8.

* Motorola also started higher, then fell 3/4 to 71 1/4 after an analyst downgraded the stock of another chip maker, Intel. That stock, traded on the NASDAQ market, rose 4 1/2 points Monday on stellar first-quarter earnings, but on Tuesday plunged 4 7/8 to 112 5/8.

* Tenneco, the diversified natural gas and farm equipment manufacturer, jumped 3 1/2 to 48 3/4

* Financial stocks gained. Merrill Lynch rose 5 1/8 to 76 5/8, boosting the price of other brokerages. Morgan Stanley rose 2 5/8 to 64 7/8, PaineWebber jumped 1 3/8 to 27, J.P. Morgan rose 2 to 72 3/8, and Charles Schwab rose 1 7/8 to 37 1/2.

* In other actively traded NYSE issues, RJR Nabisco was unchanged at 6 and Philip Morris rose 5/8 to 48 1/8 after an analyst recommended the stock. Consumer-product stocks have suffered under the perception that generic goods are eating into the profits of brand companies.

* Citicorp jumped 1/4 to 30 1/2 as interest-sensitive stocks ended higher for a second day on the lower long-term interest rates.

* Home Shopping Network fell 1 1/8 to 5 5/8. Over the weekend, Liberty Media withdrew its $642-million offer to buy control of the company.

Credit

The price of the Treasury’s main 30-year bond was up 5/32 point, or $1.56 per $1,000 in face value. Its yield, which moves in an opposite direction from price, fell to 6.78% from late Monday’s 6.79%.

Participants described trading as erratic, with Treasury bond prices rising and then retreating on conflicting reports on retail sales.

The Commerce Department reported that retail sales fell 1% in March, the second consecutive decline and the worst in more than two years.

Retailers haven’t reported such a sharp decline since January, 1991, in the midst of the recession. It brought the level of sales to the lowest in six months. Analysts had anticipated March sales to remain unchanged from February.

The news boosted bond prices, which generally benefit from gloomy economic news because it decreases the chance that inflation will move higher. Higher consumer prices can erode the value of fixed-income securities.

But the market then sold off as the Johnson Redbook reported that retail sales nationwide rose 5.6% in the first week of April. Sales in the same period were 12.8% higher than a year ago.

In Tuesday’s auction, the Treasury sold $9.76 billion in seven-year notes at an average yield of 5.54%, down from 6.41% at the last auction on Jan. 13. It was the lowest level since the government began issuing the securities regularly in 1978.

But a lack of interest in the notes in the secondary market hurt prices, said Robert Brusca, chief economist and senior vice president for fixed income at Nikko Securities International Inc. He said “at the last minute, the demand for the seven-year (note) wasn’t there.”

The federal funds rate, the interest on overnight loans between banks, dropped to 2.81% from 3.06% late Monday.

Currency

The dollar declined against most major foreign currencies in worldwide trading, driven lower by a weak U.S. retail sales report, but it steadied against the surging Japanese yen.

Activity in the foreign exchange market in New York picked up from the slow holiday pace. Many European markets were closed Good Friday and Easter Monday.

In New York, the dollar finished the day at 113.40 yen, up from 112.80 yen late Monday. The British pound strengthened to $1.5580 from $1.5460 late Monday.

Commodities

Rainy weather in the Midwest had speculators betting on corn planting delays and a corresponding increase in soybean acreage. Corn futures ended mixed and soybean futures fell Tuesday in response to such notions.

Light, sweet crude oil for May delivery ended unchanged on the New York Merc at $20.46 a barrel.

April gold rose 70 cents on New York’s Commodity Exchange to $337.70 an ounce; May silver ended unchanged at $3.88 an ounce.

Market Roundup, D6