Wall Street stocks ended lower as cautious investors fixed on today's jobs data and talk of U.S. military action in Bosnia.
* As the government bond market continued to grapple with the Treasury's debt management overhaul, yields on many longer-term bonds rose.
* The dollar ended lower against all other key currencies, hurt by growing pessimism that today's report on employment data for April would reveal further unsettling weakness in the U.S. economy.
Traders were waiting for the April employment report since recent economic data indicated a weak recovery. Economists estimated that the April figures would show a 148,000 rise in jobs and a steady 7% unemployment rate.
The Dow Jones average closed at 3,441.90, down 7.20 for the day. In the broader market, declining issues barely outnumbered advancers on the New York Stock Exchange. Big Board volume was moderate, at 254.37 million shares, down from 274.24 million shares Wednesday.
Analysts also said the issue of U.S. military action in Bosnia was unsettling.
The self-proclaimed Bosnian Serb republic rejected a peace plan accepted by Croats and Muslims. That drew a stinging rebuke from President Clinton, who said collective U.S.-European action is needed.
"The Bosnia situation is like the cloud that hangs over the market," said Hugh Johnson, chief investment officer at First Albany Corp. "That raises all sorts of questions over Clinton's economic plans. The deficit reduction turns on significant cuts on defense spending."
Drug stocks reversed recent gains as traders took profits.
Thom Brown, a managing director at Rutherford, Brown & Catherwood, said a delay in the release of Clinton's long-awaited health care plan dampened sentiment.
Among the market highlights:
* Weak medical stocks included Pfizer, off 1 1/4 to 69 1/4; United Health, down 3 5/8 to 56 1/2; and U.S. Healthcare, off 3 1/4 to 46 1/4.
* Among retailers, Woolworth fell 2, to 29 3/8. Its sales last month fell 2.3%, and it expects first-quarter net to be considerably less than year-ago levels.
* Pier One fell 1 1/4 to 9 5/8 after it estimated first-quarter earnings will be less than last year.
* On the plus side, J.C. Penney rose 1/2 to 43 3/8 after reporting a 4% rise in same-store sales. The Gap rose 2 1/4 to 32 1/2 after posting a 2% rise in sales for April.
* Buffets Inc. shares jumped 3 3/4, to 36 1/2. The owner of Old Country Buffet restaurants reported higher than expected first-quarter profits.
* Among actively traded issues on the NYSE, Borden fell 1 3/8 to 21 7/8. Duff & Phelps cut its long-term recommendation to hold from buy, saying the company's earnings recovery has been behind schedule.
Overseas, stocks fell in Tokyo on profit taking after the end of the Golden Week holidays. The 225-share Nikkei average closed 297.15 points lower at 20,622.03. London's Financial Times 100-share average fell 10.2 points, to 2,786.3. In Frankfurt, the 30-share DAX average ended 0.1 point higher, at 1,623.26.
Leading the rise in bond yields were two maturities chosen by the Treasury in its bid to curtail long-term debt--the key 30-year bond and the seven-year note. Traders sold these securities, saying their value could be undermined by uncertainty in the market.
Trading in general was cautious in anticipation of the April employment figures due out today.
The yield on the Treasury's main 30-year bond moved up to 6.80% from 6.78% on Wednesday. Its price, which moves inversely to the yield, fell 7/32 point, or $2.19 per $1,000 in face value.
Meanwhile, the seven-year bond's price fell 3/16 point after the Treasury announced Wednesday that the maturity would be eliminated. The Treasury also said it would decrease sales of the key 30-year bond as part of its shift toward shorter-term debt.
The plan, which calls for semi-annual refunding auctions instead of quarterly ones, is aimed at saving on government interest payments and driving down long-term rates by reducing the supply of bonds.
Trading Thursday in the secondary market, which saw long-term interest rates pushed up, showed that investors and dealers need time to sift through the changes.
Ordinarily, expectations of a shrinking bond supply would drive yields down, but uncertainty in the market on Thursday pushed them up.
"No one wants to trade issues that are not liquid. When you start cutting issues in half or eliminate them . . . you take away liquidity," said Jim Kenney, head trader in government securities at Prudential Securities Inc.
The federal funds rate, the interest on overnight loans between banks, edged up to 2.875% from 2.813% late Wednesday.
Money brokers said there was some dollar-buying early in the day, but later, many traders reduced their dollar holdings out of concern that the employment report would show anemic expansion in jobs.
"The dollar gave up some of the ghost at the end of the day," said Hillel Waxman, chief foreign exchange dealer at the New York branch of Bank Leumi Trust Co. "It was really a day when everybody sat back and said, 'Let's see what happens with unemployment.' "
In New York, the dollar fetched 110.03 Japanese yen, down from 110.55 yen at the same time Wednesday. It also settled at 1.574 German marks, down from 1.581. The British pound rose to $1.581, more expensive than its $1.565 level at the same time Wednesday.
Elsewhere in commodities trading, precious-metals futures rebounded strongly as investors fearful of military escalation in Bosnia sought safety in silver and gold.
Gold for current delivery rose $2.80 an ounce on New York's Commodity Exchange, to $357.40 an ounce; silver rose 6 cents, to $4.35 an ounce.
The weaker dollar also supported gold futures, according to analyst James Steel of Refco Inc. in New York.
In energy trading on the New York Mercantile Exchange, light, sweet crude oil rose 1 cent, to $20.47 a barrel.
Market Roundup, D8