NEW YORK -- Stocks closed lower yesterday as declines in steel and transportation issues outweighed a rally in IBM.
The Dow Jones industrial average slipped 2.24 points from Monday's record close, to finish at 3,565.46. The Dow swung in a 35-point range yesterday, rising as high as 3,583.90 as IBM surged and as low as 3,549.25 after Bethlehem Steel Corp. tumbled.
Broader market averages also declined. The Standard & Poor's 500 fell 0.85, to 448.24, and the Nasdaq Combined Composite dropped 3.54, to 701.
"The three stories were the transports, the steels and IBM," said Dale Tills, manager of institutional equities trading at Charles Schwab. Considering the weakness in the first two stock categories, he said, "the market is doing pretty well."
Steel stocks plunged after the International Trade Commission overturned some penalties against foreign steel producers in a trade dispute and cleared Japan and France of most charges of dumping -- selling at below-market prices -- in the United States.
As a result, some price increases imposed by U.S. steelmakers whose foreign competitors will no longer face U.S. import duties might not stick.
"Steel stocks are definitely spooking this market," said Todd Clark, a vice president in block trading at Mabon Securities.
Mr. Tills, of Schwab, said: "The way the stocks are acting shows people think the Japanese aren't going to be penalized. They're afraid of softer prices" in the steel market.
Reflecting this concern, Bethlehem Steel plunged $3.875, to $14.875, on volume of 5.7 million shares, 13 times its daily average of the past three months. Nucor Corp. shed $4.50, to $81, and Inland Steel dropped $3.25, to $26.375. National Steel stock sank $5.50, to $14.875, and USX Corp.-U.S. Steel Inc. plunged $4.625, to $32.
The ITC ruling prompted Peter Marcus, an analyst at PaineWebber Inc., to issue "sell" recommendations on 10 steel stocks and Wayne Atwell of Morgan Stanley to lower his ratings on Bethlehem Steel, Inland Steel and Nucor.
Stocks of retail stores, autos, long-distance telephone companies, beverages, foods and steel led the decline in the S&P; 500. Oil, computer systems and household products gained the most.
Concern about rising oil prices sent airline stocks into a tailspin. Railroad issues fell amid concern that the flooding in the Midwest is causing delays in rail shipments. UAL Corp. fell $2.75, to $135.75, and CSX Corp. eased $1.75, to $73. The Dow Jones transportation average fell 13.68, to 1581.12.
Declining stocks exceeded advancing issues by a margin of about 9-to-7 on the New York Stock Exchange. Trading was active, with about 257 million shares changing hands.
International Business Machines Corp. soared as high as $45.875, before closing at $45.75, up $3.375, in trading of 6.2 million shares, more than three times its daily average of the past three months. Trading was delayed for 54 minutes as buy orders piled up after the computer maker released second-quarter results.
IBM's stock, which had fallen up to 10 percent in the past week, to a 19-year low of $41.125, rallied in part because investors had already anticipated billions of dollars in charges and another cut in the dividend.
"Certainly, they killed the stock in the last few weeks," said Edward Laux, head trader at Kidder, Peabody & Co. "It seemed the only way to go was up."
IBM reported a record second-quarter loss of $8.04 billion, or $14.10 a share, reflecting restructuring charges of $8 billion after taxes. The loss from operations was 8 cents a share. IBM also slashed its quarterly dividend, to 25 cents a share, from 54 cents, bringing the annual payout to $1, from $2.16.