Inflation Fears Depress Stocks; Dow Off 21.16 : Jitters Over Election Also Pressure Market

Stock prices skidded in light trading Monday as the possibility of rising inflation continued to unnerve the market on the eve of the U.S. presidential election.

The Dow Jones industrial index lost 21.16 to close at 2,124.64.

In the broader market, declining issues outpaced advances by nearly 4 to 1 in nationwide trading of New York Stock Exchange-listed stocks, with Big Board volume totaling 133.87 million shares, down from Friday’s 143.58 million.

Blue chip stocks extended Friday’s 25-point decline, as last week’s strong October employment figures continued to undermine the market by raising the possibility of interest rate hikes to keep a lid on inflation. The Labor Department reported Friday that the jobless rate dropped to 5.3% last month from September’s 5.4%, matching a 14-year low set in June and suggesting a robust economy.

Another report indicating solid economic growth was the U.S. purchasing managers’ index released early Monday, which registered 56.8% in October, up from September’s 54.8%.

Jeffrey Applegate, Tucker Anthony market strategist, called last week’s employment report “unambiguously strong” and said progress in the stock market was further hindered by weak bond prices and a soft dollar.

Investors Cautious

The dollar fell more than a pfennig to close at 1.7775 West German marks from 1.7895 at Friday’s close and at 124.50 Japanese yen from 124.95.

The elections also kept many investors on the sidelines, reflected in the anemic NYSE volume.

Some analysts said the possibility that Gov. Michael S. Dukakis might upset Vice President George Bush, the apparent Wall Street favorite, weighed on the market. A Wall Street Journal/NBC poll showed Dukakis gaining in recent days, although other polls showed Bush holding a wide margin.

But others dismissed the possibility of a Dukakis win and said the market is geared to a Bush victory.

“A Bush victory is already baked into the pie,” said Hildegard Zagorksi of Prudential-Bache Securities Inc. “What we’re seeing is just a little blue Monday follow through from Friday’s bad market.”

Another analyst said investors worried that regardless of who wins the elections, concerns about the economy will persist.

“Even with a Bush victory, we’re faced with rising inflation, higher interest rates, concerns about the federal deficit--the same questions about the economy,” said Alfred E. Goldman, vice president for A. G. Edwards & Sons Inc. in St. Louis. “You’ll have trouble finding anyone who thinks either Bush or Dukakis has developed a sense of coming to grips with these things.”

Blue Chips Mixed

Among actively traded issues on the NYSE, Sears Roebuck dropped 7/8 point to 43 3/4, IBM fell 1 1/8 to 119 1/8 and Pillsbury was off 1 3/8 at 59. Pillsbury said it was spinning off its Burger King unit.

RJR Nabisco, amid a takeover battle, rose 1 3/4 to 87 3/8, and Ford gained 1 3/8 to 51.

Shares of Church’s Fried Chicken fell to 7 3/4 after its board rejected A. Copeland Enterprises’ $8-a-share offer as inadequate.

Shares of Veeco Instruments Inc. dropped 3 to 19 7/8 after the electronics instruments company said negotiations with a party expressing an interest in buying Veeco for $26.50 a share were suspended.

Holly Farms shares fell 5/8 to 54 after the company reiterated its rejection of a $52-a-share tender offer from Tyson Foods.

In foreign trading, stock prices fell in Tokyo on Monday, as investors opted to take profits and head for the sidelines, brokers said. The Nikkei 225-share index fell 180.39 to 27,866.36.

On the London Stock Exchange, prices ended down, with the Financial Times 100-share index closing 14.6 lower at 1,819.7 because of worries about the outcome of the U.S. presidential election and renewed weakness on Wall Street.