FINANCIAL MARKETS : Economic Uncertainty, Poor Earnings Reports Push Dow Down 39.55

The stock market fell sharply Thursday in a volatile session, pounded by fresh uncertainty about the direction of the economy and more disappointing third-quarter corporate earnings reports.

The Dow Jones index of 30 industrials fell 39.55 to 2,613.73, bringing its drop over the last four sessions to 75.41 points.

Declining issues outnumbered advances by about 11 to 4 in nationwide trading of New York Stock Exchange-listed stocks, with 406 up, 1,141 down and 410 unchanged.

Big Board volume was 175.24 million shares, against 155.65 million in the previous session.

Before the opening the Commerce Department reported that the gross national product grew at a 2.5% annual rate, after adjustment for inflation, in the third quarter.

That matched the increase posted for the second quarter and was in line with, or slightly stronger than, advance estimates in the financial world.

But observers also said the report showed a buildup of inventories that betokened continued problems for the manufacturing sector of the economy, which has been struggling of late.

In addition, analysts noted that worries about corporate profits, intensified by a series of disappointing reports from individual companies in recent weeks.

A tally of the latest quarterly reports from about 430 companies by Prudential-Bache Securities through the end of last week led the firm to conclude that “so far we’re looking at a very disappointing quarter.

“Almost twice as many companies have reported negative surprises as positive surprises,” said Melissa Brown, a Prudential-Bache analyst.

The Tokyo stock index moved sharply higher to flirt with a new record close before slipping back to end with a smaller gain Thursday. The 225-share Nikkei index surged 236.09 points to close at 35,678.49 after easing 84.15 Wednesday.

In London, much lower than expected third-quarter pretax profits of 306 million pounds ($485 million) from chemicals company ICI prompted sharp falls among leading issues. The Financial Times 100-share index closed 32.5 points down at 2,129.4.

Credit

Bond prices finished narrowly mixed as a new economic report provided no major surprises and traders shifted attention to next week’s scheduled release of employment figures for October.

The Treasury’s key 30-year bond edged down 1/32 point, or about 30 cents per $1,000 in face amount. Its yield held steady at 7.88%, unchanged from late Wednesday.

Analysts said the third-quarter GNP report wasn’t likely to cause the Federal Reserve to change credit policy, and the news had little impact on trading.

In the secondary market for Treasury securities, prices of short-term issues were off as much as 3/32 point, intermediate-term maturities were down 1/32 point and long-term issues lost 1/16 point, according to Telerate Inc., a financial information service.

The federal funds rate, the interest on overnight loans between banks, was quoted at 8.75%, up slightly from 8.688% late Wednesday.

Currency

The dollar gained against most major currencies in U.S. trading, particularly the British pound, which plunged after the country’s Treasury chief announced his resignation.

Currency dealers unloaded sterling and bought dollars and West German marks following news of Nigel Lawson’s decision to leave Prime Minister Margaret Thatcher’s Cabinet.

Lawson, who had served as chancellor of the exchequer since 1983, said he was resigning because of differences with the prime minister’s economic adviser, Sir Alan Walters.

The pound, which had been quoted at $1.6130 when most trading ended in London, sank to $1.5995 on the few European markets still open after Lawson’s sudden announcement. Later, in New York, sterling fetched $1.5780, down sharply from $1.6143 on Wednesday.

Central banks, including the Federal Reserve, reportedly bought sterling to cushion its collapse, dealers said.

Even though the British government quickly appointed a replacement for Lawson, sterling was expected to remain under pressure with financial markets questioning the stability of Britain’s economic policies.

The dollar began its trading day in Tokyo by rising to a closing level of 141.90 yen, up 0.35 yen from late Wednesday. Later in London, the dollar traded at 141.58 yen. The dollar ended New York trading at 142.125 yen, up from 141.57 late Wednesday.

Commodities

Wheat futures prices fell below $4 a bushel for the first time in a month on the Chicago Board of Trade, reflecting disappointment that a newly expanded Soviet grain deal contains no incentives to boost wheat sales.

Corn prices rose in Chicago while soybeans were mixed.

On other futures markets, cocoa hit a new 16-year low; copper fell and precious metals climbed as the stock market dropped nearly 40 points; stock-index futures plunged; energy futures were mostly lower, and livestock and meat futures largely fell.

Wheat futures settled 1.75 cents to 7 cents lower.

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