Financial Markets : Kodak Drop Pulls Dow Down 25.71

Market Overview

* A steep slide in shares of Eastman Kodak dragged blue-chip stocks to a sharply lower close Wednesday. But the broad market’s tone improved from Tuesday’s drubbing.

* Treasury bond yields dipped as states and cities, flush with cash from municipal bond sales, quickly squirreled the money away in U.S. securities.

Stocks

The Dow industrials tumbled 25.71 points to 3,716.92, as component stock Kodak plunged 7 1/4 to 55 1/2 in heavy trading.

Kodak’s new chief, George Fisher, stunned analysts by warning that there will be no fast turnaround for the troubled photo industry giant.

The Dow was also hurt by Alcoa, off 1 3/4 to 70 5/8; Goodyear, off 2 1/4 to 44, and Procter & Gamble, which fell 1 1/8 to 55 3/4.

But in a switch from the past eight sessions, the broad market was stronger than the Dow’s decline suggested. The battered Nasdaq composite index of mostly smaller stocks inched up 1.50 points to 752.97. And the Dow utilities index also gained, adding 0.66 point to 224.56.

On Nasdaq, winners edged losers by a small margin, though losers still dominated on the New York Stock Exchange.

Though NYSE volume was extremely heavy, analysts said that may reflect technical trading in advance of Friday’s “triple witching” day, the quarterly expiration of key stock index futures and options.

Apart from the options and futures action, analysts said many investors may be reluctant to do much trading between now and the end of the year.

“Many institutional money managers have already closed their books” for the year, said Edward Nicoski, market strategist for Piper Jaffray in Minneapolis.

Among the market highlights:

* Industrial stocks were hit by profit taking across the board. Clark Equipment lost 1 to 46 1/4, Cummins Engine fell 2 to 51 3/4, TRW dropped 1 1/2 to 65 1/2, Reynolds Metals sank 1 3/4 to 45 3/4 and Bearings eased 3/4 to 27 3/8.

* Another loser was computer retailer CompUSA, off 2 1/8 to 20 3/8 after the surprise resignation of its chairman, Nathan Morton.

* Southland-based mortgage finance giant Countrywide Credit tumbled 2 1/4 to 24 3/8. It reported surprisingly weak third-quarter earnings.

* On the upside, Archer-Daniels-Midland rallied 1 1/4 to 23 5/8. Merrill Lynch raised its rating on the stock, citing a national smog-control plan that will benefit the company by boosting demand for corn-derived ethanol fuel.

* Boeing gained 1 5/8 to 42 3/4 after the company reported new orders from Brazilian airline Transbrasil and from Korean Air.

* Among new issues, Amway Asia Pacific sold 7.9 million shares at 18 each and rocketed to close at 28 5/8 on the NYSE. The shares represent ownership of the well-known consumer products distributor’s Far East arm, which sells in Australia, Hong Kong, Malaysia, New Zealand, Taiwan and Thailand.

Overseas, Tokyo stocks jumped at the close, with the Nikkei ending at 17,489.15, up 180.42 points.

In London, a strong consumer spending report coupled with a low-inflation report drove the FTSE-100 index up 30.4 points to 3,278.8.

But Frankfurt’s DAX index slumped 39.27 points to 2,110.70, continuing to be hurt by Russian extremists’ recent election victory.

In Mexico City, the Bolsa rallied 23.27 points to 2,389.86.

Other Markets

Municipalities sold about $2 billion in new bonds Wednesday in a year-end rush to borrow money before interest rates head higher.

Cash in hand, many of the bond issuers temporarily stashed the proceeds in Treasury securities. That helped bond yields edge lower across the board. The yield on the 30-year T-bond dipped to 6.27% from 6.28% on Tuesday.

Meanwhile, the dollar was mostly higher in lackluster, light trading.

Elsewhere, gold for current delivery rose 40 cents to $387.40 an ounce on the New York Comex, while silver was unchanged at $5.09.

Cotton futures prices surged to new highs, helped by word of poor crops in China and Pakistan.