Marlboro Markdown Leads Dow Drive : Markets: News of cheaper cigarettes from Philip Morris, along with an unexpected employment report, lit up a ‘selling frenzy.’

Stocks plunged on Friday, responding to weak employment data, surging bond yields and a steep drop in the value of Philip Morris shares.

The Dow Jones industrial average skidded 68.63 points to 3,370.81, leaving the blue chip barometer with a 69.17-point decline for the week.

Long-bond yields soared above 7% for the first time in six weeks as fears of inflation arose from the unemployment report.

Stocks began sliding at the opening bell after the Labor Department said that although the unemployment rate held steady at 7% in March, the government’s survey of business payrolls showed a surprising loss of 22,000 jobs. Some economists had expected to see a gain of 73,000 jobs.

Richard Hoey, chief economist and portfolio manager at Dreyfus Corp., said the report “confirmed the signs of cooling in the economy that we already saw from some other data, including the purchasing managers’ survey and consumer confidence survey” released earlier this week.

Philip Morris shares plunged 14 5/8 to 49 1/2 after the company told analysts that operating earnings from its U.S. tobacco operations would fall by as much as 40% this year.

The company also said it would cut the price of its flagship Marlboro brand, spurring talk of a price war. RJR Nabisco responded with a statement that it would take “appropriate steps” to maintain its market share.

The drop in Philip Morris, a Dow component, meant a loss of about 33 points in the average. The decline lit up a “selling frenzy,” said Edward Collins, head of block trading at Daiwa Securities America.

The Dow’s plunge also triggered the New York Stock Exchange’s restriction on computerized selling programs.

Declining issues swamped advancers by more than 4 to 1 on the New York exchange, on hefty Big Board volume of 325.25 million shares, up from 234.53 million on Thursday.

* The Philip Morris news wreaked havoc on other tobacco stocks. RJR Nabisco fell 1 1/4 to 6 3/4, American Brands dropped 3 3/4 to 30, and UST, which makes snuff tobacco, slid 3 1/8 to 26, all amid heavy trading.

Other industry groups were hit by bad news of their own.

* Airline stocks sank on continued bearishness surrounding that industry. AMR fell 1 3/8 to 63 1/2; Delta lost 1 1/4 to 51 5/8; UAL fell 2 1/2 to 123 5/8. The drop in airline stocks pushed the Dow transportation average down 26.19, or 1.66%, to 1,553.96.

* Forest products stocks fell on talk that President Clinton’s lumber summit would result in lower prices. Weyerhaeuser dropped 2 1/2 to 39 1/8; Georgia Pacific fell 1 7/8 to 58 3/4; Louisiana Pacific declined 1 1/4 to 68 5/8.

* Cable TV stocks sank, extending Thursday’s losses after the Federal Communications Commission ruled that many cable TV companies will have to cut their rates by as much as 10%. Time Warner fell 2 3/8 to 30 3/4; Tele-Communications Inc. fell in over-the-counter trading by 2 3/8 to 18 1/8.

* One bright spot was gold stocks, which rose along with gold prices. Newmont Gold rose 7/8 to 40 3/4; Hecla Mining advanced 3/8 to 10 3/4.

Broad-market indexes also fell. The NYSE’s composite index fell 4.55 to 244.19. On the American Stock Exchange, the market value index fell 5.25 to 417.52. In over-the-counter trading, the NASDAQ composite index fell 16.81, or 2.45%, to 669.83.

Overseas, Japanese stocks closed sharply higher, with the 225-share Nikkei average rising 347.85 points to 19,446.94. On the Frankfurt bourse, the 30-share DAX average closed 9.83 points lower at 1,661.75. Share prices on the London stock exchange finished lower, with the Financial Times’ 100-share average dropping 8.5 points to 2,869.9.

Credit

The Treasury market’s powerful 1993 rally suffered a resounding setback as bond sellers, unnerved by a fresh sign of inflation, pushed long-term yields past 7% for the first time in six weeks.

The rush to sell led many participants to declare an end to a rally that has pushed down the yield on the benchmark 30-year bond more than a full percentage point in the last five months--from 7.76% just after President Clinton’s election to a low of 6.74% on March 10.

“It’s dead,” said Michael Strauss, chief economist for Yamaichi International. “The bond market rally is over.”

On Friday, the long bond closed at 7.06%, up from 6.96% on Thursday. The bond’s price, which moves in the opposite direction from yield, plunged 1 5/32 points, or $11.56 per $1,000 face value.

Analysts said the market’s decline, which was concentrated in long-term securities, apparently arose from fears of renewed inflation stemming from the unemployment report.

The news initially gave a lift to bond prices, which gain on negative economic signs because they lessen the chance that the inflation rate will rise.

However, upon a second look the market turned sharply negative, paying closer attention to government figures showing the average hourly wage of non-farm workers rose to $10.80 last month from $10.75 in February. Economists had expected a 2-cent increase.

Inflation erodes the value of fixed-income securities such as bonds.

The apparent sign of inflation stirred fears that prices in the economy generally are on the rise, coming after recent reports of higher consumer and commodity prices in February.

Some economists held onto the view that the March inflation figures would give the bond rally reason to resume. William Dudley, senior economist for Goldman, Sachs & Co., which is at the bullish end of market sentiment, said March producer prices will show a rise of 0.2%, and that consumer prices will also rise 0.2%.

The federal funds rate, the interest on overnight loans between banks, was quoted at 3.063%, down from 3.313% late Thursday.

Other Markets

The dollar ended mixed in extremely erratic trading, driven by sharply divided reaction to the March employment report and rumors of central bank intervention.

The greenback fell to yet another historic low against the Japanese yen, but the German mark retreated against the dollar after briefly reaching its highest level since January.

Participants initially drove down the dollar as they reacted negatively to the government’s report on payroll employment for March.

On a second look, however, the market turned positive, paying closer attention to the government’s upward revision of added jobs in February. Many economists had expected a downward revision for that month.

In New York, the dollar fell to 113.75 Japanese yen, down from late Thursday’s 114.05 yen, and rose to 1.5975 marks, up from 1.5915 late Thursday.

Elsewhere, gold, viewed as a hedge against inflation, continued to charge ahead on heightened inflation fears. On New York’s Commodity Exchange, gold for current delivery gained another $2.20 on Friday to settle at $340.90. Silver jumped 5.9 cents to $3.957 an ounce.

In energy trading on the New York Mercantile Exchange, light, sweet crude oil for May delivery rose 13 cents to $20.65 a barrel.