NEW YORK -- U.S. stocks closed below session highs yesterday after a late retreat led by paper and forest products issues.
Shares of timber producers sank amid concern about increased government regulation, a specter that has haunted drugmakers for months. Weyerhaeuser Co. fell $2.625, to $41.125; Georgia-Pacific Corp. eased $1.75, to $60.875; and Longview Fibre Co. fell $1, to $17.375.
The Dow Jones industrial average rose 15.12 points, to 3,455.10, as a drop in International Paper Co. offset gains in Minnesota Mining & Manufacturing and Chevron Corp. Early yesterday, the average soared as high as 3,478.34, boosted by computer-guided buy orders.
"We had a blue-chip rally early in the day, with people putting money to work at the end of the quarter," said Barry Berman, head trader at Robert W. Baird. Falling Treasury bond yields helped feed the early demand for stocks, traders said.
The rally in stocks faded as nervousness set in about increased government regulation of the lumber industry as well as a raft of economic news due out this week, traders said.
Among broad market indexes, the Standard & Poor's 500 rose 2.99, to 450.77. Gains in oil, drugs, health-care, and general retail stores offset a slump in paper and forest products stocks.
Paper stocks fell the most in the S&P 500. Analysts at Goldman, Sachs & Co. and Donaldson Lufkin & Jenrette Securities Corp. cut ratings on some paper companies amid concern about the prospect of export, pricing and tax changes that could hurt the industry.
The concern comes as President Clinton is scheduled to meet with representatives of the timber industry Friday.
"It may be the next group the administration might attack," said Richard Ciardullo, director of trading at Eagle Asset Management.
In the over-the-counter market, the Nasdaq Combined Composite Index fell 0.78, to 680.76.
"The market is probably just relieved" that Russian President Boris N. Yeltsin wasn't ousted over the weekend, said Edward Laux, head of block trading at Kidder, Peabody & Co.
Also, "the bond market is rebounding after throwing a big scare into the market Friday, and that's giving stocks a boost," said Daniel Marciano, senior vice president in charge of equity trading at Dillon, Read & Co.
Stocks lost ground Friday as concern about rising interest rates outweighed evidence of a stronger economy and corporate profits. The Dow industrials lost 21.34 points.