Stocks Fall; Investor Caution Cited : Bond Market Also Blamed as Dow Drops 17.07 to 2,081.08

Wall Street stocks were in retreat Monday, with the Dow Jones industrial average posting a 17-point loss, pushed down by a weak bond market and what traders said was a lack of investor interest in the market.

Analysts said the market was ripe for some selling.

“We did get quite overbought in the rally over the past couple of weeks,” said Philip Roth, an analyst at Shearson Lehman Hutton Inc. “Some pullback was in the cards.”

“Investors don’t have a great deal of conviction about the market,” said market strategist Robert Robbins with Robinson Humphrey Co.

Market analysts also said that there was also leftover selling from Friday’s triple expiration of stock options and futures.

The Dow Jones average of 30 industrials, up 29.34 points last week, fell 17.07 to 2,081.08.

In nationwide trading on the New York Stock Exchange, declining issues outnumbered advances by about 3 to 2.

Volume on the floor of the Big Board came to 135.77 million shares, down from 211.11 million Friday, when the total was inflated by futures-related trading at the so-called triple witching hour.

The key 30-year Treasury bond lost more than a half-point Monday, pushing the yield up to 9.07% from 9.01% on Friday.

“People may be perceiving rates will move up on the short-end and so may be taking profits now,” said William Bee, a Prudential-Bache Securities Inc. trader.

Higher interest rates make bonds more attractive investments than stocks. A fear of higher inflation has prompted the Federal Reserve to push up interest rates this summer.

Analysts said several forthcoming economic reports, including the consumer price index, durable goods orders and housing starts, may offer further clues to the strength of the economy and the threat posed by inflation.

Several analysts said they expected the market to recover from Monday’s selloff.

Losers among the blue chips included International Business Machines, down 1 1/2 at 112 3/4; General Electric, off 1/8 at 43 1/8; Exxon, down 3/4 at 45; Ford Motor, losing 5/8 to 49 1/2, and Eastman Kodak, down 1/2 at 44 5/8.

Elsewhere, news and rumors of possible takeovers continued to set a lively pace in an otherwise uninspired market.

Time Inc., which has been rumored to have hired a prominent investment banking firm specializing in mergers and buyouts, gained 9 5/8 to 116.

K Mart shares rose 1 1/8 to 37 1/2 amid rumors the company was weighing a share repurchase plan or other restructuring.

In foreign trading, Tokyo share prices closed slightly higher Monday after gradually sliding down from their early highs.

The Nikkei 225-share index gained 34.62 points to close at 27,901.00.

Prices on the London Stock Exchange fell during a subdued session with little economic news to influence trading.

The Financial Times 100-stock index closed down 6.8 at 1,759.9.