NEW YORK — Stock prices snapped a six-day advance Wednesday after nervousness about inflation and higher interest rates prompted traders to take profits.
After rising steadily in the longest rally on the New York Stock Exchange since July, the Dow Jones industrial index finished down 2.98 at 2,107.10. The index had been down about 20 points earlier in the day when the dollar was initially weak.
Declining issues outnumbered advances by about 5 to 4 on the New York Stock Exchange.
Big Board volume came to 185.12 million shares, against 140.40 million in the previous session. The NYSE's composite index edged up 0.01 to 153.20.
The market's decline came despite buying in International Business Machines, which rose 2 1/2 to 116 1/8.
Analysts generally gave high marks to the company's first-quarter results, which showed earnings at $1.53 a share, up from $1.30 in the comparable period of 1987.
Otherwise, brokers said the mood was cautious and subdued.
"The fact that the market paused after six days and 125 points comes as no great surprise," said William Lefevre of Advest Inc. "There is a little concern about the deficit and that provided an excuse for a little profit taking," he said, referring to today's scheduled report on U.S. trade.
The Dow index had gained 126.5 points during the six-day rally, moving through the 2,100 level for the first time since the October crash. The string of advances was the longest since July 22-31, when the Dow was near its bull market peak.
Smaller Deficit Expected
The market showed a little fatigue, according to trader Bill Bee of Prudential-Bache Securities. "There was a little unloading of positions so that people could take a fresh look after the trade report," he said.
While most economists are forecasting a further narrowing of the deficit to about $11.5 billion from $12.44 billion in January, investors remain cautious, traders said.
Brokers attributed the early stock market decline to a government report showing brisk retail sales in March. Although the 0.8% rise in sales--compared to forecasts of 0.3%--showed a healthy economy, it also suggested that the Federal Reserve may be prompted to tighten credit to counter inflation threats.
They also said the lack of new measures by the world's industrial powers to defend the dollar might result in higher U.S. interest rates in order to defend the currency. The dollar initially slipped on Wednesday although it recovered to close higher against most major currencies except the Japanese yen.
IBM's showing helped produce a modest echo effect in some of the other prominent computer and technology issues. Digital Equipment added 3/4 to 108 3/8 and Hewlett-Packard was up 7/8 at 64 1/2.
Pfizer gained 3 to 60 1/8, apparently benefiting from takeover rumors and speculation.
Federal National Mortgage rose 1 3/8 to 35. The company reported first-quarter earnings of $1.28 a share, up from 76 cents in the like period last year. Fannie Mae warrants jumped 3/4 to 8 5/8 to rank among the day's best percentage gainers.
Auto Issues Mixed
Hospital Corp. of America, which said its first-quarter profit came in above analysts' expectations, climbed 2 to 36.
Auto stocks were mixed as the industry posted a decline in early-April domestic car sales. Chrysler rose 1/8 to 24 3/4, but Ford Motor dropped 1/8 to 47 1/8 and General Motors was down 3/8 at 75 3/8.
Among active stocks, Pfizer Inc. rose 3 1/2 to 60 1/8 amid rumors that Swiss-based Ciba Geigy AG would make a bid for the pharmaceutical maker. Pfizer said it would not comment on the rumor. Super Valu Stores rose 1 to 23 1/2. Rumors that the Haft family, known for its raiding attempts in the retailing industry, was acquiring a stake in the company lifted the stock. But sources close to both Super Value and the Hafts dismissed the rumors as false.
Caterpillar Inc. fell 1 7/8 to 65. The company said that first-quarter earnings rose to $118 million, against a loss of $84 million a year ago.
The Wilshire index of 5,000 equities closed at 2,691.273, down 0.069.
Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 210.23 million shares.
Standard & Poor's industrial index rose 0.33 to 316.49, and S&P's 500-stock composite index was up 0.18 at 271.55.
The NASDAQ composite index for the over-the-counter market gained 0.03 to 383.41. At the American Stock Exchange, the market-value index closed at 305.79, down 0.80.
In Tokyo, share prices closed slightly higher Wednesday as the dollar remained stable and investors followed the lead of the U.S. market, which gained again on Tuesday. The Nikkei 225-share index gained 54.71 to close at 26,985.55.
Share prices ended slightly higher in London, with most of the activity coming in the morning as Swiss chocolate maker Jacobs Suchard S.A. launched a "dawn raid" that netted it 14.9% of British confectioner Rowntree PLC shares. The Financial Times 100-share index closed at 1,810.4, up 5.1.