FINANCIAL MARKETS : Dow Manages Small Gain as Bulls and Bears Slug It Out

Wall Street’s bulls and bears dueled to a virtual draw Monday as stocks closed mixed amid continued speculation about whether the Dow industrial index can reach the 4,000 mark anytime soon.

The Dow closed up 3.37 points at 3,936.72, giving up most of an 18-point morning gain. Most broader indexes fell modestly, and losers outnumbered gainers by about 5 to 4 on the New York Stock Exchange.

Trading settled down to a more normal pace after Friday’s hectic session, when expirations of futures and options contracts inflated volume to the sixth-highest total ever on the Big Board.

The market got its morning lift in part on relief over the settlement between the United States and Haiti’s junta leaders, which averted an impending U.S. military invasion.

But buyers stepped away in the afternoon, despite a generally calm bond market. The 30-year Treasury bond yield, which rocketed to a two-year high of 7.77% on Friday on new reports of economic strength, eased slightly to 7.75% on Monday.

Some stock buyers may have turned wary as oil prices rose sharply, following unconfirmed reports of civil unrest in Saudi Arabia, the world’s largest oil exporter.

There were reports of protests and arrests in the northern Saudi city of Buraida, where Islamic fundamentalists were said to be pressing the government for stricter adherence to Islamic law. In New York, October crude oil futures jumped 38 cents to $17.21 a barrel.

In currency markets, the Japanese yen gained broadly on expectations that U.S. trade data for July, due today, will show a widening of America’s deficit with Japan.

The imbalance is largely responsible for the U.S. currency’s persistent slump. In New York, the dollar fell to 98.53 yen from 98.93 on Friday.

The dollar’s weakness set the tone for another lousy stock session in Tokyo on Monday. The Nikkei index slid 242.15 points to 19,554.11, the lowest since April 4.

On Wall Street, many analysts admit they’re surprised by the market’s strength this month in the face of higher interest rates. But few believe the market has enough power to blow through the Dow 4,000 level soon.

“I think it’s going to be difficult for the Dow to get through 4,000 for the balance of this year,” said Ricky Harrington, analyst at brokerage Interstate-Johnson Lane.

Jim Schroeder, analyst at MMS International, thinks the Dow may indeed top its record high of 3,978.36 soon but that the achievement would be fleeting.

Among Monday’s highlights:

* Some classic growth stocks revived. Coca-Cola jumped 1 1/4 to a record 49 after saying it expects third-quarter earnings to rise 25%. Rival Pepsico added 1/8 to 33 3/8.

Drug stocks were also strong, including American Home Products, up 1 3/8 to 58 1/2; Lilly, up 2 3/8 to 58 3/8, and Pfizer, up 7/8 to 65 7/8.

* Paper and lumber shares surged on optimism about rising prices. International Paper gained 1 5/8 to 78 1/4, Georgia-Pacific added 1 5/8 to 74 3/8 and Stone Container leaped 7/8 to 20 7/8.

* Some gold stocks staged a rally, though bullion was flat. American Barrick leaped 1 1/4 to 25 5/8 and ASA surged 1 1/8 to 51 1/2.

* Time Warner jumped 1 3/8 to 37 5/8 after financial columnist Dan Dorfman reported that General Electric, which is exploring the possibility of selling all or part of its NBC-TV unit, is also considering an opposite strategy of buying Time Warner. GE, which denied it is in talks with Time Warner, fell 1/2 to 50 1/2.

* On the downside, Nike slumped 2 5/8 to 62 7/8 after the shoe company reported a 7% drop in fiscal first-quarter earnings. The results were slightly below expectations.

Other weak market sectors included energy and auto-related stocks.

Market Roundup, D6