Fed Cloud Rains on Dow, Dollar, Bonds

Blue-chip stocks, bonds and the dollar fell Tuesday as investors took profits amid uncertainty about whether the Federal Reserve Board will raise interest rates again next week.

The Dow Jones industrial average bobbed above 7,300 points for the first time, but ended the day at 7,274.21, down 18.54 points from Monday’s record finish.

Most broad-market measures also retreated after struggling to extend Monday’s rally.

The Nasdaq market suffered the heaviest damage Tuesday as Intel slid sharply on news that the computer chip giant is being sued by Digital Equipment for alleged patent infringement.

The bond market briefly provided some support for stocks after the Commerce Department reported that retail sales fell 0.3% in April, slightly more than expected and the biggest decline in 10 months.

Although key readings on the status of inflation will be released today and Thursday, analysts said the data could have little impact on next Tuesday’s Fed meeting.

As bond prices fell, the yield on the 30-year Treasury crept back toward 7%, coming to rest at 6.92%, up from Monday’s 6.89%.

On the New York Stock Exchange, declining issues outnumbered advancers by an 8-7 margin in moderate trading.

The Standard & Poor’s 500-stock list fell 4.53 points to 833.13, and the NYSE composite index fell 1.60 points to 433.97. Both measures had closed at record highs in Monday’s advance.

The Nasdaq composite index fell 10.60 points to 1,333.59.

Among Tuesday’s highlights:

* Intel led stocks’ retreat, tumbling 6 3/4 to 152 3/8 on news of the lawsuit by DEC, which rose 2 1/4 to 35 3/8.

Other chip makers declined after the industry reported a revised growth estimate. Micron Technology fell 1 7/8 to 34 5/8 and Atmel dropped 3/4 to 26 1/2.

* The afternoon pullback stole some thunder from IBM, which in the morning set an all-time high at 176 1/8 before retreating to 173 5/8, up just 1/8 on the day.

* Auto issues dropped as a strike at a General Motors unit that makes electronics parts threatened to close auto factories across the U.S. GM fell 2 to 56 3/4, Ford fell 1 1/4 to 35 3/4 and Chrysler lost 1/8 to 31 3/4. Honda Motor’s American depositary receipts retreated 1 5/8 to 63 1/2.

In currency trading, the dollar settled in New York at 118.50 yen, down from 119.30 on Monday and its lowest finish since late January.

Meanwhile, coffee prices soared to their highest level since July 1994 as continued worries about tight supplies sent speculators on a buying spree.