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STOCKS : Dow Drops 18.32; Fears on Interest Rates Cited

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From Times Staff and Wire Services

The stock market lost ground Monday in a quiet session dominated by worries about the outlook for interest rates.

The Dow Jones average of 30 industrials, down 6.93 last week, lost 18.32 to 2,929.95.

Declining issues outnumbered advances by about 8 to 7 in nationwide trading of New York Stock Exchange-listed stocks, with 722 up, 841 down and 478 unchanged.

Big Board volume came to just 163.10 million shares, down from 237.66 million on Friday.

A survey by researchers at the University of Michigan turned up preliminary evidence of a sharp increase in consumer confidence early this month, after the end of the Gulf War. News of that sort had been widely rumored in the markets late last week.

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But investors seemed unsure whether it signaled lasting change in the course of the economy. Also, a jump in interest rates accompanied the consumer confidence news, giving investors pause.

However, smaller stocks acted better than blue chips. The NASDAQ composite index eased just 0.02 to 466.27.

Among the market’s highlights:

* Drug issues led the profit-taking wave. Merck lost 2 1/8 to 105 7/8, Warner-Lambert fell 1 7/8 to 72 1/2, Pfizer gave up 1 3/8 to 103 1/4 and Centocor dropped 2 1/8 to 62 5/8.

But some health-maintenance organization stocks gained. United Healthcare added 2 1/4 to 34 7/8, and U.S. Healthcare jumped 1 7/8 to 46 3/8.

* Lockheed led the NYSE active list, down 2 1/2 to 40 1/2. Investor Harold Simmons sold a 12-million-share block, ending a fight for control of the company.

* Some blue chips were higher. IBM gained 1 1/4 to 127 7/8, Philip Morris rose 5/8 to 67 and McDonald’s added 1/2 to 35.

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* Energy stocks were lower. Exxon dropped 3/4 to 56 3/8, Chevron lost 1 to 75 1/2, Texaco fell 1 1/2 to 62 3/4 and Mobil fell 1 5/8 to 62 7/8.

Chemical stocks also were mostly lower, hurt by a negative Barron’s article. Dow Chemical fell 1 7/8 to 51 1/4, and Monsanto lost 1 1/4 to 57 5/8.

* CBS added 1 1/4 to 169 on renewed vague takeover rumors.

* Nike dropped 2 1/2 to 47 1/2. The company reported quarterly earnings at the low end of estimates. Meanwhile, L.A. Gear jumped 1 to 13 1/2 after the firm reached agreement with its banks to restructure its loans.

* Real estate developer Del Webb rose 1 to 9 1/4. Brokerage Kidder Peabody initiated coverage of the stock with a buy recommendation.

* Among Southland stocks, Bridgford Foods gained 1 to 15 1/2 after reporting quarterly earnings up 15%. Pacific Enterprises jumped 1 5/8 to 36. The U.S. Supreme Court vacated damages that the conglomerate was ordered to pay in a real estate case and sent the case back to the California courts.

In London, shares ended broadly lower as buying interest evaporated and the market grew preoccupied with today’s budget announcement in Parliament. The Financial Times-Stock Exchange index of 100 leading shares rebounded from the day’s low of 2,477.7 to close down 3.6 at 2,490.6.

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In Frankfurt, foreign selling in a thin, nervous market took Germany’s 30-share DAX index down 17.70 to 1,552.85.

In Tokyo, stocks closed firmer but off their highs, with the Nikkei index ending above 27,000 for the first time since Aug. 16. The 225-share average rose 303.81 to 27,146.91.

Credit

Bond prices fell as traders continued to worry about prospects of inflation in a better economy.

The Treasury’s bellwether 30-year bond fell 13/32 point, or $4.06 per $1,000 in face amount. Its yield rose to 8.32% from 8.29% Friday.

Traders said the price of Treasuries slid in response to Friday’s release of several economic reports, coupled with anecdotal evidence, that indicated the recession may be ending. A stronger economy discourages investment in fixed-income securities such as bonds, because inflation usually accelerates with economic growth.

Today, the bond market is braced for the release of the February consumer price index figures.

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The federal funds rate, the interest on overnight loans between banks, was quoted at 5.9375%, up from 5.875% late Friday.

Currency

The dollar rocketed to its highest level in eight months against the German mark, buoyed by a wave of optimism that the outlook is upbeat for the U.S. economy.

“Everybody is just chasing the dollar,” said trader Eugene Chang at BankAmerica in Los Angeles.

In New York, the dollar ended at 1.628 German marks, up sharply from 1.607 on Friday. The dollar earlier touched 1.638 marks, its highest since July.

Against the Japanese yen, the dollar closed at 138.10, compared to 137.75 on Friday. It was the highest since September.

The rise was unchallenged by central banks, which sold dollars last week in a bid to brake the currency’s advance. “The failure of the central banks to knock the dollar back down last week may have convinced them that they were throwing good money after bad,” said Jeremy Hawkins, senior economic adviser at Bank of America in London.

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Commodities

Prices of silver and platinum futures tumbled as falling commodity prices weakened hopes for a strong economic recovery. Gold futures also fell.

Silver futures settled 14.8 to 15.6 cents lower on New York’s Commodity Exchange, with the contract for delivery in March at $3.94 an ounce, its first close below $4 since March 7.

Platinum ended $9.60 to $9.80 lower on the New York Mercantile Exchange, with April at $396.80 an ounce; gold was $2.10 to $2.20 lower on the Comex, with April at $363.70 an ounce.

Silver and platinum have industrial uses that make them more sensitive than gold to economic signals. The white metals rose sharply through late February and early March on hopes that the end of the Gulf War would hasten an economic recovery.

But recent economic recovery signals haven’t been strong enough to sustain the metal bulls.

Silver and platinum also responded to a general decline in commodity prices, said Bernard Savaiko, senior metals analyst with Paine Webber Inc. He said declining commodity prices reflected a lack of demand for raw materials.

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Elsewhere, April crude oil fell 25 cents to $19.76 a barrel in New York futures trading on speculation that today’s report by the American Petroleum Institute, a trade group, will show a rise in this week’s oil inventories.

Market Roundup, D6

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