Dow Off 28.35; Interest Rate Worries Cited

Wall Street stocks fell sharply Wednesday in a seesaw session rife with rumors and worries about the sluggish U.S. economy and the direction of interest rates.

The Dow Jones average of 30 industrials, down about 40 points at its lowest levels of the day, closed with a 28.35 loss at 1,924.57.

Declining issues outnumbered advances by nearly 3 to 2 on the New York Stock Exchange, with Big Board volume totaling 237.27 million shares, against Tuesday’s 164.92 million.

Stocks lost ground in early trading as rumors of a Soviet nuclear accident battered utilities issues. The group recouped its losses after Moscow denied the rumor, which may have grown out of a test telex by the International Atomic Energy Agency.

By the early afternoon, stocks were in plus territory, but they retreated after bond prices slumped on worries that further interest-rate declines might not be imminent.

Lukewarm demand for U.S. securities at the second leg of the Treasury’s $27 billion note auction punctured investors’ expectations of easier credit conditions.

Interest rates had been falling lately amid expectations of a weakening economy. Analysts say that has left the stock market facing a dilemma.

Eastman Kodak Fell 2 7/8

Investors like the look of lower rates, but many are put off at the same time by concern about how far the slowdown in business activity might go.

“The overriding concern is clearly the economy,” said Hugh Johnson at First Albany Corp. “And there’s the fear that volatility will rear its ugly head again.”

One of the biggest contributors to the Dow Jones industrials’ loss was Eastman Kodak, down 2 7/8 at 40 7/8 in active trading. The company reported fourth-quarter earnings of 75 cents a share, against 22 cents in the comparable period last year, but brokers said the figures fell short of some investors’ expectations.

Other losers among the blue chips included International Business Machines, down 7/8 at 109; Merck, down 4 5/8 at 149 3/4; Du Pont, down 1 5/8 at 81 3/4, and General Electric, down 1 1/8 at 43.

General Motors bucked the down trend, rising 1 to 65 3/8 with the help of an increase in its late-January car sales.

American Electric Power led the active list, off 3/8 at 29 1/8 on turnover of nearly 27 million shares. Analysts ascribed much of the activity to strategies based on the company’s impending dividend payment.

In foreign trading, stocks closed lower on the London Stock Exchange. The Financial Times- 100-share index was off 8.1 points at 1,766.3 at the close.

The index hit had been down 17.5 points in late trading. Volume was 405.4 million shares, up from 352.2 million shares a day earlier.

In Tokyo, stocks closed mixed in light trading. The Nikkei 225-share index fell 76.84 points to close at 23,595.37. The index lost 60.11 points Tuesday.