Gold Drops Amid Lure of Rising Stocks

Gold prices tumbled Monday as the U.S. stock market’s stunning 1996 rally reached new heights, causing other investments’ allure to fade.

February gold futures on the New York Comex slid $4.40 to $401.20 an ounce, losing about the same percentage as the streaking Dow Jones industrial average gained for the day.

The Dow closed up 58.53 points, or 1.1%, at a record 5,600.15, marking its first close above 5,600 and placing it within 7% of the 6,000 mark.

But the broad market’s rise was far less impressive Monday. Winners topped losers by 1,356 to 956 on the New York Stock Exchange, but losers had a 1,899-1,749 edge over winners in the Nasdaq market of mostly smaller stocks.

Although most major market indexes joined the Dow at record levels, their gains were relatively small. The NYSE composite index added 0.7% to 351.70; the Nasdaq composite index edged up less than 0.1% to 1,095.38.

Analysts say the blue-chip Dow’s phenomenal surge this year in part reflects the urgency with which big investors--especially mutual funds--are investing the huge amounts of cash they received from clients in January, traditionally a heavy investment month.

To invest quickly, it’s easiest to buy highly liquid stocks such as Coca-Cola, IBM and GM, or to buy futures contracts on the blue-chip Standard & Poor’s 500 index. Either way, the effect is to sharply boost that segment of the market.

The Dow’s gain so far this year is 9.4%; in contrast, the Nasdaq composite is up 4.1%.

But analysts note that the fundamentals also have been supporting the market: The U.S. economy is weak but is expected to rebound, corporate profits are strong, and interest rates have been falling.

The bond market rallied again Monday, with the yield on the benchmark 30-year Treasury bond sliding to 6.03% from 6.09% on Friday.

William Dodge, strategist at Dean Witter Reynolds in New York, said the stock market’s rise has been “‘more methodical than maniacal,� but he conceded that a short-term pullback may be overdue.

Among Monday’s highlights:

* The market’s “rotation� continued, as investors turned away from many of the consumer-goods stocks that had surged last week, instead favoring heavy-industry issues that have lagged recently.

Winners included Caterpillar, up 3 to 67 5/8; Union Carbide, up 1 3/8 to 44 1/4; DuPont, up 2 5/8 to 80 3/4; bearings maker Timken, up 1 1/8 to 46 5/8; and Chrysler, up 1 1/8 to 56 7/8.

Also, TRW shot up 5 1/2 to 90 5/8 as investors reacted to the firm’s decision Friday to sell its credit-reporting business for $1 billion and buy back up to 15% of its stock.

* Energy stocks also reawakened. Chevron surged 1 3/8 to 56 1/8, Mobil jumped 2 1/4 to 115 5/8, Royal Dutch leaped 3 1/4 to 145 1/2 and British Petroleum was up 2 1/8 to 103.

* Most phone utilities were strong. Bell Atlantic jumped 2 to 74 3/8, BellSouth leaped 1 5/8 to 45 1/2, Ameritech gained 1 1/2 to 66 3/8 and Pacific Telesis rose 3/4 to 32 3/8.

* On the downside, Department 56 plummeted 15 5/8 to 22 3/8 after the maker of collectibles and gifts said first-quarter orders would fall 10% from a year ago as some dealers attempt to cut inventories.

Another stock hurt by weak consumer spending trends was shoemaker Kenneth Cole, which slid 4 3/8 to 12 7/8 after warning that its latest quarter’s earnings would be below estimates.

* In the takeover arena, Duracraft rocketed 15 39/64 to 43 7/64 after Honeywell said it would acquire the appliance maker for $283 million, or $43.50 a share, in cash.

In foreign trading, Mexico’s Bolsa index continued to slide, falling 34.54 points to 2,950.57 after troubled conglomerate Grupo Sidek said it is unable to make certain debt payments.

Market Roundup, D8

RECORD RALLY: No end in sight for the bull market. A1.