Stocks Slip; S&P; Sees 1% January Gain

Mild profit-taking trimmed U.S. stock prices on Friday after three days of major gains.

The Dow Jones industrials lost 66.52 points, or 0.8%, to 7,906.50, but the broad market was mixed, and most indexes lost little.

The Dow again made a run for the 8,000 mark, but couldn’t hold. It was pulled down by weakness in some “cyclical” stocks whose earnings stand the greatest chance of being hurt if the economy slows sharply. GM, for example, fell $2.19 to $57.94; International Paper lost $2 to $45.69.

Traders said some investors may have been concerned that Federal Reserve Chairman Alan Greenspan, speaking before Congress on Thursday and Friday about the economy, perhaps sounded more concerned than expected about Asia’s economic woes.

For the most part, Greenspan said Asia’s slide shouldn’t have a long-lasting effect on the U.S. economy. But his comments sounded worried enough to convince bond traders that the Fed won’t tighten credit any time soon, and may in fact cut rates this year.

In response, the 30-year Treasury bond yield fell to 5.79% on Friday from 5.84% on Thursday and 5.97% a week ago.

The bond market’s rally belied reports Friday showing that the U.S. economy grew at a brisk 4.3% annualized pace in the fourth quarter. (Story, A1.) Also, an index of Chicago manufacturing activity fell less in January than expected.

Nonetheless, “All of the strong economic news is being discounted in the market,” said Mark Miller, money manager at Kayne Anderson Investment Management in Los Angeles. “Everyone expects the first quarter to be slower.”

Whether that will mean significant disappointments in corporate earnings in the spring remains to be seen. The market’s rally this week was partly attributed to fourth-quarter corporate earnings that were better than expected.

One healthy sign for the bulls: Despite January’s market volatility, the Standard & Poor’s 500 index rose 1% for the month. A gain in January often heralds a gain for the year.

The Dow was down a mere 0.02% for the month. The Nasdaq composite rose 3.1% for the month, boosted by major tech stocks. But most “pure” small-stock indexes fell in January, including the S&P; SmallCap index, which lost 2%.

Among Friday’s highlights:

* Tech stocks showing strength included Sun Microsystems, up $1.38 to $47.94; Xylan, up $2.25 to $18.50 after reporting better-than-expected earnings; and Computer Sciences, up $2.13 to $84.88.

Also, disk drive makers gained after Western Digital reported surprisingly good earnings. Its shares jumped $1.63 to $18.88. Seagate surged $2.56 to $23.19.

* On the downside, energy, drug and banking issues were hit by profit-taking. Also, Kellogg sank $2.38 to $46.38 after reporting quarterly earnings slipped 2.8% because of greater competition. The company also warned about 1998 weakness. But Ralston Purina surged $4.88 to $93.88 on a strong earnings report.

In foreign trading, Asia’s rebound continued, with the main Thai stock index up 10.7% to 495.23 and the Philippines’ index up 8.4%.