FINANCIAL MARKETS : Stocks Decline; Dow Extends Loss by 13.52

Stock prices lost ground for the third straight session Thursday as traders warily awaited the latest government data on inflation.

The Dow Jones index of 30 industrials fell 13.52 to 2,759.84, bringing its loss over the last three trading days to 31.57 points. The average hit a record closing high of 2,791.41 on Monday.

Big Board volume came to 160.12 million shares, against 164.07 million in the previous session.

Declining issues outnumbered advances by about 5 to 3 in nationwide trading of New York Stock Exchange-listed stocks, with 543 up, 907 down and 511 unchanged.

Interest rates dropped in the credit markets. But analysts said stock traders had other concerns on their minds.

The government is scheduled to report this morning on the producer price index of finished goods for September.

Estimates on Wall Street call for an increase in that measure of inflationary pressures of somewhere between 0.5% and 1%, reversing the downward trend that prevailed through the summer.

Losers among the blue chips included Ford Motor, down 1/2 at 52; Philip Morris, down 5/8 at 44 3/8; Procter & Gamble, down 1 7/8 at 129 1/2; Eastman Kodak, down 5/8 at 47, and General Electric, down 1/8 at 58.

Owens-Corning Fiberglas recorded one of the day’s biggest percentage losses, falling 2 7/8 to 30 3/4. The company said its operating income for the third quarter would fall short of both analysts’ estimates and comparable levels from the period last year.

Chrysler lost 5/8 to 24. The company estimated its third-quarter results at around the break-even point, not counting an extraordinary gain from the sale of part of its stake in Mitsubishi Motors.

Shares dropped sharply in Tokyo as investors took their cash out of equities following Wednesday’s half percentage point rise in the discount interest rate, dealers said. The 225-share Nikkei average plunged 444.73 points or 1.26% to close at the day’s low of 34,795.34.

On the London Stock Exchange, share prices advanced largely for technical reasons. The Financial Times 100-share index rose 19 points to 2,237.8.

Credit

Bonds closed marginally higher but lost ground late in the session amid concerns about a possible oversupply of government issues on the market.

The Treasury’s closely watched 30-year bond finished 1/16 point higher, or 62.5 cents for every $1,000 in face value, after having been up 11/32 point in late afternoon trading.

The bond’s yield, which falls when the price rises, slipped to 8.04% from 8.05% late Wednesday.

Bonds had moved moderately higher early in the session amid renewed expectations that the Federal Reserve Board would relax credit, allowing interest rates to fall and bond prices to rise, said William V. Sullivan, director of money market research for Dean Witter Reynolds Inc.

A stronger dollar also contributed to the bond market’s gains.

But late in the day, the Resolution Funding Corp., the agency created to sell $30 billion in government notes to fund the cleanup of insolvent savings and loans institutions, said it would announce details of the bond issue next week.

That, coming just a few weeks ahead of the Treasury’s announcement about its next quarterly refunding auction, led to a selloff by bondholders concerned that too many issues on the market would depress the price of their holdings, Sullivan said.

In the secondary market for Treasury bonds Wednesday, prices of short-term government issues rose 1/8 point to 3/16 point, intermediate maturities rose 1/8 point and long-term issues rose 3/32 point, according to figures provided by Telerate Inc., a financial information service.

The federal funds rate, the interest on overnight loans between banks, was quoted at 8.813%, unchanged from late Wednesday.

Currency

The dollar fell in subdued dealings. Gold prices rose worldwide.

On the Commodity Exchange in New York, gold bullion for current delivery closed at $363.40 an ounce, up $1.40 from Wednesday. Republic National Bank of New York quoted a late bid for gold at $363 an ounce, $1.50 higher than Wednesday’s late bid.

Many currency traders also stayed on the sidelines while awaiting the release of retail sales and producer prices data for September.

“If the producer price index comes in on the high side, the (Federal Reserve) won’t have room to ease (interest rates) any further,” said Bob Morrissey, a senior trader at the Bank of Boston’s New York office.

“While the Fed is concerned about the level of the dollar, their major priority is to keep inflation” down, he added.

Foreign exchange dealers said the dollar was undermined by speculation that the Fed was considering a cut in the discount rate, its interest charge on loans to member banks. Lower interest rates make U.S. investments less attractive to foreigners, thereby diminishing their need for dollars.

Stephen Flanagan, a vice president at Manufacturers Hanover Trust Co., said that although the dollar is holding to key levels, the U.S. currency is likely to come under pressure because interest rate differentials have narrowed considerably.

U.S. interest rates are about 2.5% higher than those in Japan, he said.

Separately, the British pound got a boost from comments by Chancellor of the Exchequer Nigel Lawson, who told the governing Conservative Party’s annual conference that he would continue to fight inflation with high interest rates for as long as necessary.

In Tokyo, where trading ends before Europe’s business day begins, the dollar rose to 144.60 Japanese yen, from 143.90 yen. Later in London, the dollar traded lower at 144.25 yen. In New York, the dollar finished at 144.15 yen, down from 144.50 yen on Wednesday.

In London, one British pound cost $1.5520, more expensive for buyers than Wednesday’s late $1.5425. In New York, it cost $1.5527 to buy one pound, more expensive than $1.5460 on Wednesday.

Gold traded late in London at a bid of $362.75 an ounce, up from $361.25 Wednesday. The Zurich late bid was $363.10, up from $361.50. Earlier in Hong Kong, gold closed at $362.75, up from $361.25.

Silver traded late in London at a bid of $5.10 an ounce, up from $5.05. On New York’s Comex, silver for current delivery closed at $5.090 an ounce, up from $5.076 on Wednesday.

Commodities

Frozen pork belly futures prices soared the permitted 2-cents-a-pound daily limit on the Chicago Mercantile Exchange amid growing supply fears rooted in the government’s decision to ship pork bellies to Poland.

On other commodity markets, copper and precious metals futures advanced, grains and soybeans were mixed and energy futures were mostly higher.

Frozen pork belly futures settled 2 cents higher across the board with the contract for delivery in February at 49.72 cents a pound.

The rally followed a surge of buying on Wednesday and may reflect the market’s uneasiness about the government’s plan to ship $10 million worth of U.S. pork bellies to Poland as part of a food-aid package.

Pork bellies are the part of a pig from which bacon is made.

Tables begin on D8