Stock Rally Fizzles; Dow Falls 13.49

A strong stock rally shifted abruptly into reverse in the final hour, wrenching major averages into negative territory in heavy trading and killing hopes for a third straight record-breaking session.

The Dow Jones industrial average settled 13.49 lower at 4,359.66. The blue-chip average surged 38 points, past the 4,400 mark in intraday trading and was posting record highs for most of the day. But it turned sharply lower late in the day, diving nearly 63 points to minus 24 before recouping some of its losses.

Traders said the late sell-off began in the futures pits and then spread to the cash market, as stock values soared so high that investors couldn’t resist selling to take profits.

“The market is very extended on the upside,” said Philip Roth, technical analyst at Dean Witter Reynolds. “At some point, somebody said, ‘hey I’ve got enough profits, let’s take them.’ “

Advancing issues outnumbered decliners by 1,158 to 1,111 on the New York Stock Exchange, with 717 unchanged. Big-Board volume was heavy at 434.93 million shares as of 4 p.m. That was the sixth-largest volume ever recorded, up from 392.3 million on Wednesday.

Some of the stocks that moved substantially or traded heavily Thursday:

NYSE

Unisys rose 1/4 to 11 3/8.

The stock was rising for the second day in a row after CNBC commentator Dan Dorfman said Alfred Kingsley, a money manager with Greenway Partners L.P., is bullish on the stock since the company has restructured and cut its debt.

Marion Merrill Dow rose 7/8 to 25 1/8.

German chemical and drug giant Hoechst AG will buy the U.S. drug maker for $7.1 billion in one of the largest acquisitions in the pharmaceutical industry.

Rubbermaid rose 5/8 to 30 1/8.

J.P. Morgan Securities Inc. upgraded the stock to “buy” from “market performer,” saying the stock had become relatively cheap and the company’s fundamental prospects were good.

NASDAQ

Intel rose 2 1/2 to 109 7/8.

Microsoft rose 5/8 to 81 1/2.

Computer-related stocks continued their rally. Chip stocks were up on upbeat presentations at a Hambrecht & Quist conference.

Adaptec fell 1/8 to 32.

The company said its gross margin, which hit 59 percent in the fourth quarter, would remain stable.

AMEX

Thermolase rose 3/34 to 29 1/8.

The shares have been rising since the company won federal approval for its hair-removal system.