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FINANCIAL MARKETS : Stocks Ease, Rates Steady as Wall Street Nervously Awaits September Jobless Report : Market Overview

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From Times Staff and Wire Reports

U.S. stocks eased Thursday on nervous selling ahead of today’s release of September employment data. Some disappointing earnings announcements also hurt sentiment, as did a sharp decline in the Dow utility index.

* Foreign stock markets turned mixed after strong rallies early in the week.

* U.S. bond yields held steady, wrapping up a remarkably slow four days as the market awaited today’s employment report. Commodities were little changed except for cocoa futures, which plummeted in record trading.

Stocks

Most major indexes lost ground, as trading slowed in advance of today’s September employment report.

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The Dow industrials fell 15.36 points to 3,583.63, as losers topped winners 11 to 8 on the New York Stock Exchange. The Russell 2000 index of smaller stocks, which hit a new high Wednesday, eased 0.28 point to 254.06.

As usual, stock investors don’t want to see a change in employment that is too strong or too weak; the former would send bond yields up, while the latter would spark worries about corporate earnings.

Indeed, another batch of poor third-quarter earnings previews upset some investors Thursday. Glass maker Corning plunged 6 1/4 to 27 3/8 after warning that third-quarter earnings could be 10% below last year’s results. It blamed the slow economy.

“Corning shows what happens if you’re below expectations,” said trader Ron Doran at brokerage C.L. King. “If there’s even a sniff of worse than expected results, the stock gets beaten up.”

Some technical analysts noted another ominous sign in Thursday’s trading: The Dow utility index sank 1.65 points to 244.86, its lowest close since mid-July. By breaking 245, the index fell through a key level of support.

The utility index now is 4.5% below its all-time high reached in mid-September. Historically in bull markets, the utility index tends to peak six to nine months before the Dow industrials, said Marc Pado, technical analyst with Highland Capital in Redding, Calif.

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That’s because a decline in utility stocks usually foreshadows a rise in market interest rates.

However, analysts noted that the utility index has had its ups and downs all year. It sold off sharply in April and May, only to rebound again in summer.

Among Thursday’s highlights:

* Retail giant Dayton Hudson followed Corning with a disappointing earnings preview. Dayton said third-quarter results will be below year-ago levels because of lower than expected sales at its Mervyn’s unit. Dayton stock fell 2 1/4 to 67 1/2, after trading as low as 66 3/8.

Other retail issues were mixed, after rallying earlier in the week on generally healthy September sales reports. Sears fell 1 1/8 to 58 1/8 and J.C. Penney lost 1 to 46 1/2, while Gap gained 3/4 to 32 and Revco jumped 1 1/8 to 15 1/4.

* Despite the spotlight on Corning and Dayton, the market also enjoyed some favorable earnings news. Publishing giant Dow Jones leaped 1 5/8 to 35 1/4 after it reported earnings that beat expectations.

Also, shipping company American President surged 4 3/8 to 50 3/8 on its quarterly report, and Southwest Airlines gained 5/8 to 35 5/8 after its chief executive gave an upbeat assessment of earnings prospects.

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* In the tech sector, entertainment software firm Broderbund Software shot up 7 1/4 at 47 3/4 after reporting quarterly earnings up 52% to 29 cents a share, exceeding analysts’ estimate of 27 cents.

Also, Atmel, which makes chips for high-performance computers, gained 2 3/8 to 35 1/8 on a strong earnings report.

* Among health care issues, U.S. Surgical rocketed 4 3/8 to 24 5/8. Research firm Cowen & Co. said the depressed surgical device maker may announce a major restructuring next week.

* On the downside, utility stocks pulling the Dow utility index lower included Southern California Edison parent SCEcorp, down 5/8 to 22 1/2; Commonwealth Edison, down 1/2 to 30, and Houston Industries, off 1/2 to 45 7/8.

Overseas, the action slowed. London’s FTSE-100 index lost 8.4 points to 3,092.4, and Tokyo’s Nikkei index dropped 234.62 points to 20,265.63.

In Frankfurt, the DAX index added 9.99 points to a new high of 1,997.04 and crossed the 2,000 mark during trading for the first time.

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Hong Kong’s Hang Seng index also hit a record, up 25.22 points to 8,066.79.

Other Markets

Interest rates closed virtually unchanged in a fourth day of trading that analysts described as the slowest in recent memory.

The yield on the Treasury’s main 30-year bond closed at 6.01%, up marginally from 6.0% on Wednesday.

The week’s unusually light trading and tight price ranges, analysts said, suggest that investors are particularly nervous about today’s September employment report.

Any indication of new strength in the economy could spark a bond selloff, analysts warn, because of the implication of higher market interest rates down the road.

In other markets Thursday:

* The dollar eased against the Japanese yen but firmed against most European currencies as dealers focused on the Continent’s economic problems.

The Belgian franc and the Spanish peseta were hit hard on fears that negotiations on reforming social laws in those countries will drag on and hurt their economies. Both Belgium and Spain have large budget deficits.

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The dollar closed at 104.92 yen in New York, down from 105.65 on Wednesday. It also closed at 1.623 German marks, nearly unchanged.

* Gold futures inched up 30 cents to $358.50 an ounce for the most active December contract on New York’s Commodity Exchange.

* Cocoa futures fell sharply in profit taking after rising early in the week on word of expected global production shortfalls. December-delivery cocoa closed down $28 to $1,118 per metric ton.

* Oil futures ended mixed. Light, sweet crude oil for delivery in November settled at $18.49 per barrel, up 7 cents at the New York Mercantile Exchange.

Market Roundup, D6

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