FINANCIAL MARKETS : Dow Edges Lower on Mild Profit-Taking

Blue-chip stocks fell prey to mild profit-taking Monday to end slightly lower, although economically sensitive shares rallied, with railroad stocks posting noticeably strong gains.

The Dow Jones industrial average meandered on both sides of its starting point during the day to finish off 0.34 point at 4,702.39.

Broader gauges, however, managed to improve on the highs they hit Friday. Technology stocks drew more buying interest, lifting the Nasdaq composite index 6.87 points to 976.63, its fourth straight record high. The New York Stock Exchange composite index climbed 0.32 point to 298.03, the Standard & Poor’s 500 list increased 0.82 point to 557.19, and the American Stock Exchange index added 0.97 point to end at 506.71.

In the broader market, gainers beat losers by about 7 to 5 on the Big Board, where trading was brisk at 409.65 million shares. That was down from the heavy 466.5 million shares of Friday, the fourth-busiest NYSE session.

Market analysts were impressed that stocks held up as well as they did Monday, given how far prices have risen recently. Last week alone, the Dow broke through the 4,600 level for the first time, then advanced through 4,700.

“It’s a monster run into the cyclicals and a hell of a move for railroad stocks,” said Ralph Bloch, chief technical analyst at Raymond James. Cyclical stocks, of which transportation shares are one category, are those that rise and fall with the economy’s health.

Michael Metz, Oppenheimer & Co. market strategist, said cyclical stocks have risen on hopes the economy will only slow down moderately and resume growth at year-end.

“If so it will mean big, big earnings gains over the next two years,” he said.

The Dow Jones transportation average rose 51.47 points to a record 1,890.98, surpassing the 1,862.29 set Feb. 2, 1994. It has been supported by strong gains in airline stocks, but it got an added lift from gains in railroads as investors bet the group would perform better in a strengthening economy.

* Conrail rose 1 1/8 to 62 1/4, Burlington Northern gained 3 1/8 to 68 1/2, Union Pacific gained 3/4 to 59 1/2 and CSX rose 3 to 84 3/8. Roadway Services jumped 4 3/8 to 52 7/8.

In the bond market, the benchmark 30-year Treasury bond yield fell to 6.51% from 6.52% on Friday. Its price, which moves in the opposite direction, rose 5/32 point, or $1.56 per $1,000 in face value.

Signs that the United States and Japan are intent on cooperating in financial matters rather than feuding over trade issues boosted the dollar, traders said.

In New York, the greenback closed Monday at 86.93 Japanese yen, up from 86.80 late Friday. The U.S. dollar also rose against the German mark, closing at 1.395 marks, up from 1.393.

Among Monday’s highlights:

Paper companies were among the cyclical stocks to post gains, after Champion International posted sharply higher quarterly earnings. Champion rose 3 1/8 to 59, International Paper rose 1 5/8 to 90 3/4 and Bowater added 4 to 53 1/2.

* Topping the Big Board actives list was Archer-Daniels-Midland, which shed 1 7/8 to 15.875 on news of the details of a federal antitrust investigation into the company involving high fructose corn syrup and other products.

* Sensormatic Electronics dropped 9 1/8 to 24 1/2 after it forecast that fiscal 1995 earnings would fall short of Wall Street expectations.

* Midlantic soared 6 1/4 to 47 5/8 after PNC Bank agreed to buy the Edison, N.J.-based bank holding company in a deal valued at $3 billion. PNC lost 1 7/8 to 25.

* Microsoft rose 3 1/4 to its highest-ever close of 98 7/8 on growing optimism about sales prospects for its forthcoming Windows 95 computer operating software.

* Merck rose 1 1/4 to 48 7/8, and Pfizer rose 1/2 to 44 3/8.

* DSG International tumbled 6 1/2 to 11 1/2 after the collapse of a management-led buyout of the disposable diaper manufacturing company at $19.25 a share.

* Joslyn rose 9 1/2 to 34 1/4 on speculation a higher offer than Danaher’s $32-a-share bid for the electrical products manufacturer will emerge, analysts said.

Overseas markets were mixed. In Mexico City, the Bolsa index rose 69.72 points to 2526.90.

Frankfurt’s DAX 30-share average ended up 25.87 points at 2,179.26, and Tokyo’s 225-share Nikkei closed at 16,242.66, up 29.58 points.