Stocks Retreat Slightly; Yields Edge Lower

Stocks encountered some profit-taking a day after the Dow industrials broke through the 8,000 mark, but the damage was minimal as many investors looked for ways to enter, rather than exit, the market.

The Dow Jones industrial average fell 18.11 points to close at 8,020.77, despite a big gain by Merck, which surged after a strong profit report. The Dow dipped below 8,000 twice during the last hour of trading, but it bounced back both times as bargain hunters went to work.

Broad-market indicators also pulled back slightly, snapping a 10-session streak of record highs for the technology-rich Nasdaq composite index.

“We were set up to get smacked today,” said Alfred E. Goldman, a market analyst at A.G. Edwards & Sons of St. Louis, noting the fretful tone of many media reports on Wednesday’s exploits in the stock market.

“Classically, you buy them at the wake and you sell them at the wedding. But the bears couldn’t get anything going because the sideline money wants in,” Goldman said. “It’s a very strong statement when a market is as extended as this one is and the sellers still can’t get anything going. That shows we still have upside momentum.”

The profit picture remained bright Thursday with strong second-quarter reports from bellwether names such as Merck, Sears Roebuck and McDonald’s.

But the big earnings event of the day came after the closing bell, when Microsoft reported its results for the April-June quarter. The software giant’s profit jumped nearly 90% for the period, but the figures only barely beat Wall Street expectations. Microsoft’s shares, which surged nearly $10 in Wednesday’s rally, had risen $1 to $149.44 ahead of the report.

Declining issues outnumbered advancers by a 9-8 margin on the New York Stock Exchange, where volume was again very heavy, totaling 629.07 million shares, the sixth-largest tally ever. Wednesday’s total was 646.03 million.

In the bond market, the yield on the benchmark 30-year Treasury bond rose to 6.49% from 6.47% on Wednesday.

The Dow’s steepest decliners included Boeing, down $2.94 to $56.25; Hewlett-Packard, down $2.38 to $66.50; and Eastman Kodak, off $2.13 to $66.25.

AT&T; also weighed down the Dow, falling $1.31 to $35 a day after the company announced that President John Walter had resigned after the firm backed away from a promise to make him the next chief executive.

Among the Dow components that reported earnings, Merck rose $8.24 to $106.74, Sears rose $2 to $58.50, McDonald’s rose 31 cents to $50.25 and Coca-Cola fell $1 to $69.88.

There was only limited reaction to economic news Thursday, which did little to change the popular outlook for steady, noninflationary growth.

The Commerce Department reported that housing starts rose 4.8% in June to 1.48 million, slightly more than expected, but the original May estimate of a 4.8% drop was revised to a steeper 6.6% decline.

Meanwhile, the Labor Department said new claims for jobless benefits fell by 28,000 last week to 349,000. But the less volatile four-week average rose from 348,500 to 348,750, the highest since the period ended Jan. 18.

Overseas, Tokyo’s Nikkei stock average rose 0.8%, Frankfurt’s DAX index rose 0.6% and London’s FTSE-100 fell 0.3%.

A forecast for more rain in parched areas of the Midwest this week pushed corn and soybean prices down.

At the Chicago Board of Trade, soybeans for July delivery closed 7.5 cents a bushel lower at $7.75 and corn for July delivery fell 1 cent a bushel to $2.66.

“Weather continues to be the dominant feature out here,” said Mark Weidner, an analyst with Cargill Investor Services.