Japan Market Scandal Creates a Global Ripple : Stocks: Revelations about two Tokyo brokerages sparked selling on exchanges worldwide. The Dow industrial index skidded 52.55 points.

Tokyo’s widening brokerage scandal helped kick off a wave of selling in stock markets around the globe Monday, deepening an already troubled market outlook.

The Dow Jones industrial average slumped 52.55 points, or 1.8%, to 2,913.01 in light but persistent selling that traders said probably would accelerate this week.

The Dow’s fall followed a 509.62-point, or 2.1%, drop in the Tokyo Stock Exchange’s Nikkei average, to 23,765.46 on Monday.

At midday today, the Nikkei had stabilized. It was off 178.90 points, or 0.8%, to 23,586.56, after falling 275 points early on.

The Japanese market, which has struggled to recover this year from a 39% plunge in 1990, had its confidence shaken anew by revelations that two major Japanese brokerages reimbursed favored clients for last year’s losses. The firms also admitted to ties with mob-run groups.

As the market opened today in Tokyo, traders reported selling by small investors said to be outraged by the big brokerages’ protection of wealthy clients.

Although the Japanese scandal has no direct effect on trading in other stock markets, experts said the news was disturbing enough to help dampen investor enthusiasm worldwide.

Also, the scandal came at a time many investors--especially in the United States--have begun to doubt that there will be a quick end to the recession that has gripped much of the world since mid-1990.

During the past week, several major American companies, including IBM and Waste Management, have warned that second-quarter profits wouldn’t meet analysts’ expectations. The forecasts suggest that the economy’s slide in the aftermath of the Persian Gulf War was more severe than government statistics indicated.

Monday, computer retailer Tandy Corp. and railroad giant Burlington Northern joined the crowd. Both warned of sharply lower earnings in the current quarter. Tandy tumbled 1 3/8 to 27 3/4, and Burlington lost 3 to 28 7/8.

Worse, “some of the companies are saying that prospects down the road aren’t all that much better,” said Jeff Kaminsky, trader at Mabon, Nugent & Co. in New York. As more investors come to fear that the economy--and corporate profits--won’t show much growth in the second half of the year, many stocks suddenly appear overpriced, traders say.

Trading volume was relatively light Monday, as just 139.26 million shares changed hands on the New York Stock Exchange. But losing stocks swamped winners on the NYSE 1,322 to 302, a clear sign of investors’ growing bearishness.

“You don’t need any trading volume to go down,” observed analyst Phil Roth at Dean Witter Reynolds in New York. With few investors willing to step up and bid, stocks fall under their own weight, he noted.

Unless new signs of a recovering economy emerge soon, many experts believe that stocks will continue to fall in the near term. Pressure will probably mount on investors to protect some of the profits they scored in the winter “victory” rally, when stocks soared on expectations of a decisive allied win over Iraq.

Although the Dow index is off 4% from its peak of 3,035.33 reached on June 3, it still is up 18% from its low of 2,475 in January.

“The bias is downward now,” said Frank Baxter, head of brokerage Jefferies & Co. in Los Angeles.

Among the market highlights:

* Tech stocks led the selloff. Sun Microsystems slumped 4 1/8 to 25 1/2 after a Wessels Arnold analyst downgraded the stock to “hold,” saying the company will experience delays in getting key new products out in the fiscal year beginning July 1. Other tech stocks continuing their recent free fall included Microsoft, down 4 1/8 to 98 1/8; Autodesk, off 4 5/8 to 52 7/8, and Intel, which lost 3 1/4 to 43 3/4.

Costa Mesa-based Archive, a disk-drive maker, lost 1 1/8 to 5 1/2 after saying it will report an operating loss of 30 to 40 cents a share this quarter.

* Traders cashed out of many industrial stocks that have recently run up on hopes for renewed economic growth. Caterpillar fell 1 3/8 to 48 5/8, Deere lost 1 3/8 to 52 1/2, Dupont slid 2 1/8 to 46 1/8, GM tumbled 2 7/8 to 41 1/4, and 3M Co. dropped 2 to 93 7/8.

* Big-bank stocks slumped on fears that second-quarter problem loans will rise sharply. Wells Fargo plummeted 6 3/8 to 81 1/2, First Interstate dropped 1 3/4 to 36 1/4, and BankAmerica fell 1 to 37 3/8.

* Among the few stocks bucking the trend, Santa Barbara-based health-care firm Mentor Corp. gained 1/2 to 14 3/4 after trading as low as 12 3/4. The company said negative comments about its new incontinence drug by an investor interviewed in Barron’s magazine were “widely inaccurate.” The company also said it was buying its own shares on the open market Monday, under a previously announced buyback program.

Credit

Contrasting sharply with the behavior in the stock market, bonds ended little changed.

Investment strategists said the bond market may have even benefited from the weakness in stocks by persuading some investors to put their money into the relative safety of government-backed U.S. Treasuries.

The Treasury’s key 30-year bond ended unchanged in price from Friday. Its yield stayed at 8.51%, the same as late Friday. Trading was described as light.

The federal funds rate, the interest on overnight loans between banks, remained unchanged from late Friday at 5.688%.

Currency

The dollar fell as profit taking and concerns about interest rates eroded the gains the U.S. currency chalked up last week.

Analysts said traders who snapped up the dollar before the weekend meeting of Group of Seven monetary officials turned around Monday, selling the greenback to capture their profits.

The dollar fell to 1.7830 German marks in New York from 1.8015 late Friday. The Japanese yen managed a small gain against the dollar, which closed at 138.70 yen in New York, down from 138.90 late Friday.

Other late dollar rates in New York, compared to late Friday’s prices, included: 1.5345 Swiss francs, down from 1.54785; 6.0545 French francs, down from 6.1225; 1,326.50 Italian lire, down from 1,341.25, and 1.14255 Canadian dollars, down from 1.14325.

Commodities

Prices of wheat futures continued to languish around their four-month lows on the Chicago Board of Trade as corn and soybean futures gained on possible weather damage to the crops.

Wheat futures settled 1.75 cents lower to 2.75 cents higher, with the contract for delivery in July at $2.71 a bushel; corn was 1.50 to 4.50 cents higher, with July at $2.3725 a bushel; oats were unchanged to 0.75 cent higher, with July at $1.045 a bushel, and soybeans were 2.75 to 8 cents higher, with July at $5.66 a bushel.

On the Commodity Exchange in New York, gold fell $2.90, closing at $363.00 an ounce. Silver slipped 2.6 cents to close at $4.348 an ounce.

Light sweet crude oil for delivery in August settled at $19.98 per barrel, down 25 cents from late Friday’s settlement price at the New York Mercantile Exchange.

Market Roundup, D10

Stocks: Trouble All Around How world stock market indexes fell Monday in the wake of Tokyo’s sharp decline overnight. Also shown is the Tokyo market’s action in early trading today. Markets are ranked in the order that they opened around the globe.

Point Pct. Index Close change change Tokyo Nikkei (Mon.) 23,765.46 -509.62 -2.1% Frankfurt DAX-30 1,691.56 -20.30 -1.2% London FTSE-100 2,458.30 -29.20 -1.2% Toronto TSE-300 3,478.80 -38.00 -1.1% U.S. NASDAQ 475.23 -10.59 -2.2% U.S. Dow-30 2,913.01 -52.55 -1.8% Mexico City Bolsa-40 1,080.49 -28.49 -2.6% Tokyo Nikkei (Tues.)* 23,586.56 -178.90 -0.8%

* midday figure