STOCKS : Wall St. Jitters Rattle Market; Dow Falls 20.94

Stock prices skidded for a second straight session Thursday as disappointing corporate earnings, soft bond prices and inflation worries joined to make Wall Street woozy.

The Dow Jones index of 30 industrials fell 20.94 to 2,711.94, extending its drop over the last two sessions to 53.83 points.

Declining issues outnumbered advances in nationwide trading of New York Stock Exchange-listed stocks, with 511 up, 968 down and 521 unchanged.

Big Board volume edged up to 152.93 million shares from 147.13 million on Wednesday.

Bond prices plunged Wednesday on talk that Japanese investors were bailing out of U.S. Treasury securities, driving stocks to their steepest losses in two months.

Bonds steadied Thursday, slipping only marginally, but yields stayed near their highest levels in almost a year. As bond prices fall, their yields rise.

The upward pressure on interest rates follows a government report Tuesday that consumer prices rose a sharp 0.5% last month, pushing the first-quarter inflation rate to its highest level in eight years.

“When rates are possibly going higher, it’s hard for investors to think very positively about the stock market,” said Jack Barbanel, president of First Global Asset Management. “With bonds being close to 9% versus stocks, people are much better off being in the bond market,” he said.

But investors stayed wary of bonds on concerns about the Japanese, key buyers of U.S. securities.

“We are sensitive to the prospect of higher rates, and the rumors that the Japanese are not only not buying our bonds, but may be selling them, makes this a not very stable market,” said Monte Gordon, research director at Dreyfus Corp.

Brokers also said investors were giving mixed reviews to first-quarter corporate earnings reports.

While a few companies have chalked up better than expected showings, analysts say the positive surprises haven’t been consistent enough to bolster confidence in the market as a whole.

Digital Equipment rose 2 1/8 to 82 1/8 in active trading. The company posted a big drop in quarterly profits, but many Wall Streeters had been expecting the news to be even worse.

Seagate Technology plunged 3 1/8 to 12 1/2 after reporting quarterly earnings of 44 cents a share--10 cents shy of Wall Street estimates. The company has been losing ground to other computer disk drive makers, including Conner Peripherals.

First Executive common and preferred shares were among the largest percentage gainers in over-the-counter trading, on optimism that the insurance company’s financial condition isn’t as bad as previously feared. The company has been hard hit recently by worries about its large junk bond portfolio.

First Executive common shares jumped 3/8, or 15.8%, to 2 3/4; its Series E preferred shares rose 1 3/8 to 5 7/8; its preferred Series F gained 1 5/8 to 8 3/4, and its preferred Series H rose 1/2 to 3. Comdisco tumbled 8 1/2 to 18, suffering the day’s biggest percentage setback, as the computer leasing company projected a substantial decline in its quarterly profits.

Reebok lost 1 1/2 to 17 1/2 after reporting a quarterly earnings gain that fell short of estimates.

Harcourt Brace Jovanovich, the most active Big Board issue, jumped 1 to 4 1/4 on takeover rumors and speculation.

CREDIT Bond Prices Firm After 2-Day Slump Bond prices stabilized at a slightly lower level in light trading after two days of sharp drops.

The Treasury’s benchmark 30-year bond fell 5/32 point, or about $1.56 per $1,000 face amount. Its yield, which rises when prices fall, rose to 8.84% from 8.83% late Tuesday.

Tom Lanier, a trader with Manufacturers Hanover Trust Co., said there was little economic news to affect the bond market.

On Wednesday, bond prices dropped steeply over fears of inflation and reports that Japanese investors, who are major buyers of U.S government bonds, were selling the issues.

The federal funds rate, the interest rate banks charge each other on overnight loans, was quoted at 8.938%, up from 8.375% late Wednesday.

CURRENCY Rumors Send Dollar Down Against Yen The dollar was mixed in domestic foreign exchange trading, losing ground against a revived Japanese yen but rising against most other major currencies.

Analysts said rumors in the markets that the Japanese were about to push their interest rates higher--placing the yen in a better position to compete with the dollar--put pressure on the U.S. currency.

Jack Barbanel, president of First Global Asset Management Inc., said the dollar has not performed as well as might have been expected in recent days, given an improvement in the U.S. trade deficit and an increase in market interest rates in the United States this week.

Barbanel said exchange rates may be stabilizing, or foreign currencies may be enjoying a technical bounce after the dollar’s recent rise.

Overseas dealers said the yen’s modest recovery after weeks of declines was a result of a range of events, notably a rebound on the Tokyo Stock Exchange and reported comments from U.S. Treasury officials that they viewed the dollar as too strong.

The dollar closed in Tokyo at 157.75 yen, down 2.12 yen from the Wednesday close. Later in London, the dollar traded lower at 156.40 yen. In New York, the dollar fell sharply to 157.25 yen from 158.125 late Wednesday.

The British pound was quoted at $1.6448 in London, up from $1.6347 late Wednesday. In New York, the pound fetched $1.6450, up from $1.6400.