Dow Falls 29.99 on Moderate IBM Earnings : Market Overview

* Stocks closed sharply lower after a disappointing earnings report from International Business Machines Corp., big losses on overseas markets and a selloff in bonds.

* The Dow Jones average of 30 industrials fell 29.99 points to 3,331.64, finishing the week with a net gain of 1.08 points.

* Treasury bond prices fell on concern about several economic reports and rumors about President Bush’s health. The yield on the Treasury’s bellwether 30-year bond was 7.68%, up from 7.61% late Thursday.

Stocks

Trading slowed a bit as Wall Streeters recalculated the outlook for a two-way presidential race after the withdrawal on Thursday of Ross Perot as a prospective independent candidate.

Declining issues outnumbered advances by about 5 to 3 on the New York Stock Exchange. Big Board volume totaled 192.12 million shares, down from Thursday’s 206.90 million.

Ron Doran, head of institutional trading at C.L. King, said afternoon rumors that President Bush had fallen ill, later denied by the White House, also weighed on stocks.

“I think it was a combination of the surprisingly negative news on IBM leaning on technology stocks, and the action of foreign markets,” said John Brooks, a technical analyst at Davis Mendel and Regenstein, of today’s decline.

IBM fell 5 1/4 to 95 and was the most active issue. The computer giant’s second-quarter earnings were much higher than the year-earlier period but fell short of Wall Street expectations.

Analysts said the expiration of July stock and index options added wariness to an already jittery market.

Among the market highlights:

* Digital was the bright spot of the technology group, climbing 2 1/4 to 43 1/4. Several analysts upgraded the stock after news late Thursday that founder Kenneth Olsen will retire Oct. 1.

* Storage Technology declined 3 3/4 to 30 7/8. Storage Tech reported second-quarter earnings of 16 cents a share Thursday, down from 47 cents a share.

* PaineWebber lowered second-quarter and full-year 1992 estimates on Baker Hughes Inc., which eased 1/8 to 20 5/8.

* Newmont Mining rose 7/8 to 53. Kemper Securities recommended the stock.

Tokyo’s 225-share Nikkei average fell 439.59 points, or 2.59%, to 16,548.07. The London stock market’s Financial Times 100-share average lost 51.5 points to close at 2,431.9, partly because of worries about the impact of the German Bundesbank’s decision to raise interest rates Thursday.

The rise in German interest rates also sent share prices plunging in Frankfurt. The 30-share DAX average dropped 37.87 points to 1,702.66, its lowest close since Feb. 19.

Credit

The price of the Treasury’s long bond, which moves in the opposite direction from the yield, fell 13/16 point, or about $8.13 per $1,000 in face amount.

The Federal Reserve Bank of Philadelphia added to the downward pressure on prices when it released a monthly economic survey that showed the middle Atlantic region’s manufacturing activity rose in July.

News of economic upturn often depresses bond prices since it makes it less likely that the Federal Reserve Board will lower interest rates. Lower rates benefit bonds.

Later, the rumors about Bush’s health added to the selling pressure on bonds, traders said.

The federal funds rate, the interest on overnight loans between banks, fell to 2.75% from 3.25% late Thursday.

Currency

The dollar fell against major currencies in what traders described as the latest of several days of bad news for the dollar and the U.S. economy.

The government reported Friday that the U.S. trade gap widened to $7.38 billion in May, which was more than the market anticipated.

In New York, the dollar fell to 1.459 German marks from Thursday’s 1.478. The dollar closed at 124.45 Japanese yen, down from 125.35 yen late Thursday.

Commodities

Precious metal futures prices leaped as investors fearful of turmoil in world financial markets shifted assets into gold, the historic safe haven in troubled times.

On other commodity markets, oil futures fell; livestock and meat futures were mixed, and grains and soybeans were mixed.

Gold for August delivery climbed $4.90 to $357.50 an ounce, a five-month high, on New York’s Commodity Exchange. July silver surged 6.3 cents to $3.971 an ounce on the Commodity Exchange.

In the meantime, light, sweet crude oil for August delivery fell 21 cents to $21.58 a barrel on the New York Mercantile Exchange.