Dow Off 33.25; Inflation Fears Depress Stocks : Indicator Hits Lowest Point in Nearly 3 Months

Fear of rising interest rates bedeviled the stock market Monday and depressed the Dow Jones industrial index to its lowest closing level in nearly three months.

The barometer of 30 blue chip stocks, still wobbly from its 81.61-point decline last week, dropped 33.25 to close at 2,004.27. The last time the Dow index closed lower was May 27, when it finished at 1,956.44.

Broader market indicators also finished sharply lower.

“You still have this global interest rate pressure,” said William King, head trader at Nikko Securities Co. International in New York. “That’s why the market got whacked.”

The mood was set for the decline by a government report that July industrial production rose 0.8%, double the June figure and much higher than market expectations.

The report raised fear that the Federal Reserve’s credit-tightening last week, which jacked up interest rates to the highest level of the year, wasn’t sufficient to quell inflation pressures in the economy.

Brokers said trading remained extremely sluggish, reflecting a broad lack of interest in stocks by institutional investors that are the biggest influences in the market.

“There are real heavy cash positions out there,” said Thomas Ianiro, a partner on the trading desk at William Blair & Co. in Chicago. “People are just waiting for all these news events.”

Losers Lead Gainers

A key event anticipated by many market participants was the June merchandise trade deficit figure, scheduled to be released by the Commerce Department before the market opens today. But there was a widespread view that whatever the deficit, it was more likely to hurt stocks than help them.

A number vastly higher than the $10.9 billion shortfall in May could weaken the dollar and encourage a selloff in stocks, some brokers argued. Conversely, a sharply lower figure could also hurt stocks by reinforcing fears that the domestic economy is growing too fast.

Declining issues outnumbered advances by nearly 4 to 1 in nationwide trading of New York Stock Exchange-listed stocks, with 1,194 down, 345 up and 432 unchanged.

Volume on the NYSE floor totaled 128.56 million shares, down from 176.96 million in the previous session. Nationwide, consolidated volume in NYSE-listed issues, including trading at regional exchanges and on the over-the-counter market, totaled 150.33 million shares.

Large blocks of 10,000 or more shares traded on the NYSE totaled 2,470, compared to 2,412 in Friday’s trading.

Technology and computer stocks were among the biggest losers, led by Digital Equipment, which dropped 3 to 97, its lowest point in nearly two years. Elsewhere, IBM fell 2 7/8 to 115 1/8, Compaq lost 1 7/8 to 54 1/2, Unisys slipped 1 to 32 and National Semiconductor eased 5/8 to 9 1/8.

Among the blue chips, Du Pont fell 2 to 80 1/2, General Electric dipped 3/4 to 39 1/2, Sears lost 1/2 to 35 1/2 and Woolworth gave up 1 1/2 to 47 1/8.

Indicators Decline

Takeover-related activity boosted several stocks, notably U.S. Shoe, which jumped 5 7/8 to 24 1/2 on reports that it would consider a possible sale or restructuring. Interco rose 2 1/8 to 72 1/8 after an investor group seeking to acquire the company announced a $70-a-share cash tender offer.

The Wilshire index of 5,000 equities closed at 2,585.700, down 34.272.

The NYSE composite index of all listed issues fell 1.95 to 146.58.

Standard & Poor’s index of 400 industrials slipped 4.66 to 297.28, and S&P;’s 500-stock composite index dropped 3.86 to 258.69.

At the American Stock Exchange, the market-value index lost 2.65 to 293.83. The NASDAQ composite index for the over-the-counter market closed at 374.07, down 4.88.

In Tokyo, the Nikkei index of 225 issues closed at 27,901.29, up 67.78, after reaching a high of about 27,958.

In London, stock prices finished sharply lower Monday amid growing fears that the British economy was overheating.

The British government reported that retail sales rose 2% in July and that industrial production fell 0.9% in June.

The Financial Times-Stock Exchange 100-share index closed off 26.6 at 1,816.8, slightly above its worst level for the day of 1,816.6.