Tokyo Stocks Lead Dow to Decline 36.23 : * Selloff: Investors’ growing nervousness about stocks shows as tech issues are dumped and money moves into bonds.

Stock prices dropped sharply on Friday in a selloff that followed another sharp decline in the Japanese stock market.

The drop also came amid speculation that more portfolio managers were switching out of stocks and into bonds, concerned about continued weakness in the economy.

The Dow Jones industrial average tumbled 36.23 points, or 1.1%, to 3,231.44, taking its cue from a 1.3% drop in Tokyo’s 225-share Nikkei average earlier Friday.

The Nikkei fell 248.50 points to 19,636.99, the lowest level in five years as Japanese investors’ confidence in stocks continued to melt away.

Though trading volume on the New York Stock Exchange wasn’t heavy--about 180 million shares changed hands, compared to 187 million Thursday--analysts said the 12-to-5 ratio of losers to winners was a strong sign that a deeper selloff may be near.

“The market appears heavy at this juncture,” said Alan Ackerman, first vice president at Reich & Co. “Concern is building over weakness in the Japanese stock market and mixed signals in our own economy.”

In Japan, a lack of buying incentives ahead of the weekend and a new fiscal year was compounded by an early morning railroad and bus strike that helped sour Tokyo market sentiment for the day, brokers said.

“We’re not even seeing any last-minute window-dressing by companies to boost their portfolios. Nobody wants to do anything, so we just go down in a vacuum,” said Toranobu Sugai of Lehman Bros. Japan.

In the United States, sellers targeted high-tech stocks, on worries that first-quarter profits will reflect a still-struggling economy. The high-tech losses pulled the NASDAQ composite index of smaller stocks down 10.73 points to 604.67, its biggest decline in nine weeks.

Leading high-tech issues lower was computer-chip giant Intel, which closed down 3 1/2 to 55 1/4 after trading as low as 51 1/2. The stock was slammed after an analyst at Bear, Stearns & Co. lowered his rating to neutral from buy, citing increasing competition in the chip market.

Still, some analysts contended the overall market’s drop was little more than normal profit taking. Edgar Kam, analyst for Ernst & Co., said he “couldn’t see anything serious in the near-term” with the selling. “The volume isn’t overwhelming,” he said. “The market is falling on its own weight.”

A sharp drop in Treasury bond yields, however, suggested that more investors may be moving out of stocks and into bonds, on the expectation that the economy will stall again soon, leading to lower interest rates.

Analysts said reports this week of poor 10-day car sales for mid-March, and a “lusterless” University of Michigan March consumer sentiment survey, helped generate doubts about the speed of the nation’s recovery.

“When you see a divergence between stocks and bonds, that usually signals some renewed concerns about the economy,” said Hugh Johnson at First Albany Co.

There were rumors that Wall Street giant Goldman Sachs & Co. had suggested selling stocks to buy bonds, but the firm denied those rumors, saying it remains bullish on stocks.

Friday’s decline left the Dow off 44.95 points for the week.

Among the market highlights:

* Tech stocks that followed Intel lower included Apple, off 3 to 61; Novell, down 2 to 57 1/4; Microsoft, off 3 3/4 to 121 1/4; FileNet, off 3 to 33 3/4; Motorola, off 2 7/8 to 75 1/2, and Digital Equipment, down 2 1/4 to 54 1/2.

* Home builders’ shares were hard hit by worries about the economy. Kaufman & Broad fell 3/4 to 19 1/4, Ryland dropped 1 3/8 to 23, and Centex slid 1 1/2 to 50.

* Auto stocks also lost substantial ground. Ford slid 1 3/8 to 38 1/4, and GM dropped 1 1/4 to 36 3/4.

* Chiquita Brands tumbled 1 7/8 to 29 1/8 after Merrill Lynch cut earnings estimates, citing worries about banana selling prices in Europe. Competitor Dole Foods dropped in sympathy, losing 1 1/8 to 34 7/8.

* Household International plunged 9 1/4 to 46 3/4 in heavy trading after the financial services company said its first-quarter earnings may be half of analysts’ predictions. Donald C. Clark, Household’s chief executive, blamed the outlook on weakening economies overseas.

Meanwhile, the dimming foreign picture was reflected in losses in those markets: London stocks fell, with the Financial Times 100 index off 24.3 points to 2,447.9. The index lost 8.7 points for the week.

In Frankfurt, the 30-share DAX finished off 7.57 points to 1,711.45. It lost 25.15 points for the week.

Credit

Bond yields fell across the board, as some investors evidently fled stocks for bonds on expectations of renewed economic weakness ahead.

The benchmark 30-year Treasury bond rose 20/32 of a point in price, pushing its yield down to 7.94% from 8% Thursday.

Wall Street’s losses and rumors about more investors potentially moving from stocks to bonds helped power Treasury yields lower, analysts said.

“Part of the (downward) bias in yields is the stock market. There might have been reallocation (of assets) going on,” said Lawrence Schuster, trader at Harris Government Securities.

Federal funds--overnight loans between banks--were trading at 3.62% late in the day, compared to the Federal Reserve’s presumed 4% target.

Currency

The dollar fell against other major currencies, following stocks lower on worries about the U.S. economy’s strength.

The dollar closed at 1.6405 German marks and 133.05 Japanese yen, down sharply from a Thursday close of 1.6615 marks and 134.05 yen.

The British pound climbed to $1.7430 from a Thursday close of $1.7240.

Commodities

Spot gold climbed $1.40 an ounce to $342.50 on New York’s Commodity Exchange, while silver added 5 cents to close at $4.14 an ounce. Both metals had fallen sharply in recent weeks and were overdue for a rebound, traders said.

Meanwhile, oil prices fell as traders responded to warmer weather and higher output by the nation’s refineries.

Light sweet crude oil for delivery in May settled at $19.16 per barrel, down 12 cents, on the New York Mercantile Exchange.

Hog and cattle prices ended mixed, but surprises contained in a government report issued after the close of trading were expected to give the market a jolt next week and send prices sharply lower.

The Nikkei’s Continuing Decline

225-share average, Friday closes Jan. 5, 1990: 38,274.80 March 27, 1992: 19,636.99