Market Makes Sharp Reversal; Dow Plunges 51 : Broad Decline Comes on Heels of Near-Record Stock Gains in Previous Session

The stock market dropped sharply Wednesday, giving back most of the big gain it made Tuesday as concern revived over rising interest rates.

The Dow Jones index of 30 industrials, which had soared 66.47 points Tuesday, plunged 51.13 to 2,285.94, its fifth-largest point decline on record.

Volume on the New York Stock Exchange came to 185.93 million shares, against Tuesday’s 191.34 million.

Declining issues outnumbered advances by about nine to five on the NYSE, with 565 up, 1,043 down and 334 unchanged. The exchange’s composite index lost 2.95 to 162.55.

Analysts said investors were not much impressed by the strong showing Tuesday of the blue chips represented in the Dow Jones industrial average. They noted that gains in many smaller, secondary issues were less dramatic.

Bond prices turned sharply lower again Wednesday, after a mild recovery the day before, on a revival of fears of higher inflation and higher interest rates.

Analysts said a positive government report on durable goods orders and a rumor--later denied--about the possible resignation of Federal Reserve Board Chairman Paul A. Volcker contributed to the market’s shakiness.

Concerns Reignited

The Treasury’s key 30-year issue, which rose about 3/4 point on Tuesday, was off about 1 3/4 points, or $17.50 per $1,000 in face amount. That pushed up its yield to 8.49%from 8.29% on Tuesday.

The report on durable goods orders, showing an increase in March of 3.4%, was better than expected and reignited concerns about a possible Fed action to raise interest rates.

A two-year note auction held Wednesday confirmed just how depressed demand is for Treasury issues. Yields, which move in the opposite direction from bond prices, rose in the auction to the highest level in more than a year. The average yield was 7.20%, up from 6.43% at the last auction on March 24.

Losers among blue chip stocks included International Business Machines, down 2 3/4 at 154; American Telephone & Telegraph, down 3/4 at 24 3/8; General Motors, down 1 3/4 at 87 3/8; Coca-Cola, down 2 at 43 3/8, and General Electric, down 2 at 103 7/8.

Utility stocks, which are highly sensitive to interest rate changes, also had a rough day. The Dow Jones average of 15 utilities fell 6.45 to 202.84, for a loss of a little more than 3%.

Supermarkets General led the NYSE active list, up 4 3/4 at 45 7/8 on volume of more than 4.3 million shares. The company agreed to a buyout at $46.75 a share by a group including Merrill Lynch and some Supermarkets General executives.

Unisys also bucked the downtrend, climbing 3 3/8 to 116 1/2. On Tuesday, the company reported earnings for the quarter ended March 31 of $1.71 a share, up from 35 cents a year earlier.

Xerox, which also posted a higher quarterly profit Tuesday, rose 1 3/4 to 76 5/8.

Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 216.12 million shares.