Stocks Retreat As Bonds Weaken

Stocks pulled back Tuesday as a weak day in the bond market and the collapse of a major drug merger provided some excuses to nibble away at some of the market’s record-setting gains.

The Dow Jones industrial average fell 40.10 to 8,370.10, extending a minor slide from last Wednesday’s record close of 8,451.06. Even with that downturn, the Dow is up nearly 6 percent for 1998 and about 20 percent from the low point of late October’s sell-off.

Broad-market indexes, several of which set new highs on Monday, also slumped as interest rates rose in the bond market despite another impressive reading on inflation.

“February has been a tremendous month, and to drive forward day after day and week after week is impossible,” said Larry Wachtel, market analyst at Prudential Securities. “The fact that the pullbacks are so mildmannered is impressive.”

Trading opened on a sour note after Monday’s late news that merger talks between British drug makers SmithKline Beecham and Glaxo Wellcome had unraveled.

Bonds struggled Tuesday despite a report showing that a big drop in energy prices helped keep an overall measure of consumer prices unchanged in January, the first month without a rise in prices in four years.

Declining issues outnumbered advancers by a 3-to-2 margin on the NYSE, where volume totaled 594.60 million shares, up from Monday’s modest pace.

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

NYSE

SmithKline Beecham, down 6 at 60.

Glaxo Wellcome, down 6-15/16 at 55-1/2.

The British drug giants ended talks for what would have been the biggest corporate merger in history. SmithKline said late Monday the negotiations began unraveling Friday after Glaxo sought to change a tentative deal announced Jan. 30.

J.P. Morgan, up 3-11/16 at 116.

The nation’s fourth-biggest banking company is cutting about 5 percent of its work force and has been examining merger possibilities.

Motorola, down 2-7/8 at 57-5/8.

The Wall Street Journal reported that Motorola is struggling to fix defects in its software and cellular network equipment. The problem has already cost Motorola a $500 million order from a wireless joint venture owned by Bell Atlantic, US West and AirTouch Communications.

NASDAQ

Petco Animal Supplies, down 3-1/2 at 14.

The animal supplies retailer issued an outlook for its fiscal year begun Feb. 1 that fell shy of analyst forecasts.