Dow Falls for 4th Straight Session

Market Overview * The stock market skidded to its fourth straight decline Monday as concerns about rising interest rates continued to plague investors who mounted an across-the-board selloff.

* Fears that the economy is beginning to strengthen touched off another sharp rise in long-term bond yields, pushing down prices for a sixth consecutive session.

Stocks

The broad-based exit from sectors ranging from auto makers to telecommunications also came on the heels of a plunge in stock prices in Japan and Europe.

The Dow Jones industrial average started off lower, partially due to program selling, then bounced off the 3,650 mark four times before the close. It finished down 23.76 points at 3,670.25.

In the broader market, declining issues outnumbered advancers by about 7 to 2 on the New York Stock Exchange. Big Board volume totaled 280.13 million shares, down from 302.97 on Friday.

The Nasdaq composite plummeted 13.43 points to 783.13.

The stock market followed the selloff in bonds. Stock traders believe higher interest rates may prompt a large movement of money out of stocks and into less risky investments such as CDs that have been paying paltry yields.

As a result, analysts said stock investors are taking profits before year’s end.

“Portfolio managers are not willing to take on any uncertainty for the next few weeks. It becomes very tempting to show (some good) performance for the year and just close the books,” said Eugene Peroni, director of technical research at Janney Montgomery Scott Inc. in Philadelphia.

Walter Murphy, senior market specialist at Merrill Lynch, called the decline a normal market correction, following record highs earlier in the fall.

“You can attribute this to interest rates in the sense that the bond market is in its own correction. I don’t think it’s any more serious than that,” he said.

“It’s a correction for both markets, and once the corrections run their course, we’ll be able to move higher again,” Murphy said.

Stocks were also influenced by the broad decline overseas. Stocks plunged in Tokyo amid deepening economic pessimism. The Nikkei average closed at 17,384.84, down 556.35.

In Europe, German shares fell 2.3%, with the 30-share DAX average finishing down 47.37 points at 2,030. London’s Financial Times 100-share average ended down 37.4 points at 3,070.6.

Among the market highlights:

* Paramount Communications, in the middle of a hostile takeover battle, was the NYSE’s most active issue, rising 2 5/8 to 79.

Despite the rise, Paramount’s market price is still well below the $85-per-share friendly offer made by Viacom Inc. and the hostile $90-per-share bid made by QVC Network Inc. Viacom was down 1 1/4 to 47 5/8 on the Amex and QVC was off 1 to 49 3/4 on the Nasdaq.

* General Motors was off 1 1/2 to 52 3/4. The company recalled 13,000 Buicks, saying a fuel hose may detach, which could lead to an engine fire. Other auto stocks were also lower.

* Pacific Telesis, the regional phone company, was down 2 3/8 to 54 after an article in Barron’s questioned why it and other big players in the cellular phone business are getting out. AT&T; fell 3/8 to 55 7/8 and MCI dropped 5/8 to 24 3/4.

* Technology stocks continued to take a beating, accounting for much of the drop on the Nasdaq exchange. Dell Computer was off 1 1/2 to 22 1/4.

Profit takers also took a bite out of telecommunications equipment stocks. DSC Communications dropped 2 3/4 to 56 1/4, Newbridge Networks fell 1 3/4 to 53 1/8 and Ericsson tumbled 3 3/4 to 38 3/4.

* Summit Technologies fell 1 to 21 3/4 on concern that a rival maker of laser eye surgery equipment may have gained an edge, analysts said.

* AMR, parent of American Airlines, ended off 1/8 to 68 1/8 after the flight attendants union agreed to end its five-day walkout against the carrier.

Credit

The selling continued despite hopes for a breather from the recent market rout, which has pushed up long-term bond yields more than half a percentage point in the past month.

“People are beginning to wonder if this is more than a correction,” said Matthew Alexy, market strategist at First Boston Corp.

The 30-year bond yield surged to 6.38% from 6.33% at Friday’s close. The bond’s price fell another 3/4 point, or $7.50 cents per $1,000 in face value. Prices and yields move in opposite directions.

There were no new significant statistics to trigger Monday’s price decline, which analysts said was exaggerated in thin trading. Rather, they cited lingering selling momentum fueled by a recent spate of reports showing that economic growth is accelerating this quarter.

Stronger growth can aggravate inflation, which hurts the value of long-term, fixed-income investments such as bonds.

Market participants had hoped the selling would abate during this holiday week. The market will be closed Thursday in observance of Thanksgiving and closes early Wednesday and Friday.

“The market started off in the hole, made some efforts to get out, but it just never got any better,” Alexy said.

The government’s sale of $17 billion in new two-year notes had little noticeable influence on the secondary markets, where new securities are traded.

The government sold the notes at a high yield of 4.27%, in line with expectations. Reflecting decent demand for the notes, the bid-to-cover ratio--a measure of auction demand that compares number of bids offered to those accepted--was 2.74 to 1.

The federal funds rate, the interest on overnight loans between banks, was 3.1%, up from 2.9% on Friday.

Other Markets

The dollar retreated against the German mark and was mixed against other currencies as traders locked in profits from the greenback’s recent advance against European monies.

Trading was light as the market began to wind down for the Thanksgiving holiday and the end of the month.

The mark strengthened against the dollar and other currencies after Germany reported a 6.8% rise in its M3 money supply through October.

“It perhaps dashed some of our hopes of another German rate cut in the near future,” said Stephen Flanagan, a vice president at Paine Webber.

Lower interest rates might boost the sluggish German economy, but would probably cause the mark to fall in value, since German-denominated deposits would offer a lower return to investors. The dollar closed in New York at 1.704 German marks, down from 1.7146 on Friday. It closed at 108.48 Japanese yen, up 0.75.

In other markets:

* Gold finished at $378.30 an ounce, up 30 cents from Friday on the New York Comex. Silver closed at $4.690 an ounce, down a penny.

* Oil prices rose slightly on the New York Merc, with light, sweet crude rising 4 cents to $17.10 a barrel.