STOCKS : Dow Falls 44.31 on War Fears, Election Upsets

Rising war fears combined with disappointment over a big U.S. Treasury bond sale and the election results sent the stock market reeling and knocked the Dow Jones industrial index down 44.31 to 2,440.84.

The war worries, which lifted crude oil futures for December $2.68 a barrel in New York, rose as British Prime Minister Margaret Thatcher declared that Iraqi President Saddam Hussein faces war soon unless he withdraws from Kuwait. The warning mingled with wide speculation that a war is more likely now that the U.S. elections are over.

“The talk got oil prices running, and that spilled over quickly into our market,” said Kenneth Ducey, head of institutional trading at S. G. Warburg & Co. in New York.

Volume on the New York Stock Exchange was a modest 149.13 million shares, compared to 141.13 million on Tuesday. Losing issues outnumbered gainers by 1,134 to 444, with 441 stocks unchanged.

As the Dow fell 1.8%, the Standard & Poor’s 500-stock index also fell 1.8%, or 5.61 points, to 306.01. The NASDAQ composite index of over-the-counter stocks slipped 3.73 to 336.80, a 1.1% loss.

The $2.68-a-barrel spike in the December oil contract brought the contract’s closing New York Mercantile Exchange price to $35.31.

Analysts said the fear of Persian Gulf hostilities was the primary force in the market, but there was also unhappiness with waning investor interest in the U.S. Treasury bond sale. The auction of $34.25 billion in government securities began Tuesday and runs through today.

“The auction was not a disaster, but a bit of a disappointment,” said Michael Metz, market strategist for Oppenheimer & Co. in New York. He said much of the market’s optimism about an easing of interest rates by the Federal Reserve had faded by the end of the session.

The markets also heard several rumors, among them a report that the Western allies planned to strike Iraq soon to prevent the country from completing construction of a nuclear weapon later this month, Metz said.

There has been speculation for some weeks that the Administration would not launch an attack on Iraq before the elections, lest it be accused of trying to manipulate the election results, said Chris Pedersen, director of trading at Twenty First Securities in Manhattan.

Pedersen said the election results were also a negative for the market, because many on Wall Street had hoped that the defeat of a large number of incumbents would show Congress that it needed to become more serious about reducing the deficit. Instead, 96% of House incumbents were reelected, and all but one senator.

Pedersen said the market was also driven by a technical factor. At the close of Tuesday’s trading, the value of the S&P; index fell below its 50-day moving average, which, he said, “re-established a downward trend.”

Market technicians were also watching a sudden reversal in the Dow utility index, he said, noting that some market analysts consider utility prices a leading indicator for other averages. Utilities had been gaining in recent weeks, but dropped sharply in the past three sessions. Wednesday, the Dow utility index fell 1.9% to 209.07.

Among the market highlights:

* All of the 30 stocks in the Dow industrial index fell except McDonald’s, which was flat at 26 3/8. Among big losers, International Paper fell 1 1/2 to 46 1/2, GE lost 1 3/8 to 52, and Alcoa gave up 1 1/4 to 51 3/4.

* Many financial stocks weakened anew. Insurance stocks were particularly hard hit. Santa Monica-based Fremont General plunged 2 to 12 5/8 after a disappointing profit report. USF&G; fell 5/8 to 11 5/8 after slashing its dividend 66%. Other weak insurance stocks included Chubb, down 1 3/8 to 44 5/8, and Kemper, off 1 1/4 to 17 5/8.

* Investors dumped pollution control stocks after Browing Ferris’ report of dismal quarterly earnings Tuesday. Browning fell another 2 1/2 to 21 3/4 after falling 6 on Tuesday. Other losers Wednesday included Waste Management, down 1 1/2 to 31 1/2, Zurn Industries, off 2 to 30, and Chemical Waste, off 1 1/8 to 19.

* CBS traded as high as 162 but settled back to close up 1/2 at 158 5/8. Speculation mounted about the potential sale of the late founder William S. Paley’s 8% stake by his heirs. But analysts said Laurence A. Tisch’s 25% CBS stake makes the disposition of Paley’s shares irrelevant.

* Circuit City lost 7/8 to 10 3/8 after falling 2 7/8 on Tuesday on a negative October sales report.

* Cereal stocks continued to fall on worries about possible product price wars. General Mills slumped 2 1/8 to 84 3/8, Kellogg lost 5/8 to 68 1/4, and Ralston fell 2 5/8 to 94.

* Oil stocks were hard hit, despite rising crude prices. Mobil lost 2 1/4 to 57 3/8, Chevron fell 1 1/2 to 67 3/8, Louisiana Land tumbled 2 3/8 to 48 5/8 and Unocal fell 1 1/8 to 29 1/8.

* Pasadena-based Jacobs Engineering gained 1 1/8 to 20 3/4 on a strong earnings report.

In Germany, shares dropped 1.9% in thin, nervous trading. It was the seventh session in the last nine that the market has declined as traders worried about the Mideast. The 30-share DAX index fell 27.09 points to 1,371.15.

Share prices closed lower on London’s Stock Exchange. The Financial Times 100-share index was down 10.6 points at 2,059.2.

In Tokyo, stocks closed lower as rumors of war in the Gulf and scandal depressed a market already slumping on lower oil prices and a weaker yen. The key 225-share Nikkei index fell 465.50 points or 1.9% to 23,500.25. Early today, the Nikkei lost another 441.26 points, nearing the 23,000 mark.

CREDIT: Mideast Anxiety Hurts Bond Prices

Bond prices fell sharply Wednesday as a successful auction of 10-year Treasury notes was overshadowed by renewed fears of war in the Middle East.

The government’s bellwether 30-year bond fell 19/32, or about $5.94 per $1,000 in face value. Its yield surged to 8.69% from 8.63% late Tuesday.

The federal funds rate, the interest on overnight loans between banks, traded at 7.675%, down from 7.688% late Tuesday.

CURRENCY: Dollar Slips Against Mark, Gains on Yen The dollar fell against the German mark, hitting a record low on speculation that the Federal Reserve Board may lower interest rates again.

But Mideast war concerns boosted the currency later in the session, and the dollar rose against the Japanese yen, which was hurt by rising oil prices.

The dollar finished at 1.4874 marks, down from 1.4927 at Tuesday’s close, but above a historic New York low of 1.4785 set earlier in the session. The dollar finished at 128.73 Japanese yen, above Tuesday’s close of 128.20 yen.

The British pound rose to $1.9690 in New York from $1.9657 late Tuesday.

COMMODITIES: Gold, Silver Head in Opposite Directions Gold futures slipped and silver futures rallied modestly on New York’s Commodity Exchange in lackluster trading.

On other commodity markets, soybeans rebounded, grains were mixed and livestock and meat futures were mixed.

Platinum fell sharply on the New York Merc, though, erasing most of the gains posted in the two previous sessions.

Gold finished 20 to 30 cents lower, with December at $387.90 an ounce, and silver was 2.9 to 3 cents higher, with December at $4.287.