FINANCIAL MARKETS : Stocks Retreat Broadly on Economic News

Stocks suffered another broad setback Wednesday as soaring interest rates continued to unnerve investors.

The Dow industrial average fell 13.79 points to 3,787.34, though it recovered from an early plunge of 50 points that triggered the New York Stock Exchange’s “collar” on computerized trading.

The final damage was much worse in the overall market. Losers overwhelmed gainers by 3 to 1 on the NYSE, and all broad indexes finished down--though well above their lows for the day. Big Board trading was heavy, with 360 million shares changing hands.

The market’s tenor was poor from the start, after the Commerce Department said factory orders soared 4.4% in August, the biggest gain in nearly two years.

The Dow, which slumped 45.76 points Tuesday, immediately nose-dived at the opening bell, as bond yields rocketed.

While strong economic reports would seem to be good news for corporate profits, the factory-orders report and other recent signs of U.S. economic expansion are causing fear and loathing on Wall Street, said James Solloway, research director at Argus Research in New York.

Investors are worried that the robust economy is raising inflation fears at the Federal Reserve Board and that the central bank will soon counter the threat by lifting interest rates for the sixth time this year to slow the expansion.

Speculation is widespread that the Fed’s next rate hike could come as early as Friday, when the government issues September employment data.

Labor Secretary Robert B. Reich, when asked about that prospect, declined to advise the independent Fed on what action to take. But he indicated that a key component of inflation--workers’ wage increases--might give the central bank cause to re-evaluate the inflation threat.

Reich said in a telephone interview that “wage increases have been extremely modest” this year and that because “labor costs comprise two-thirds of average business costs . . . this is not the environment in which I would expect accelerating inflation.”

Nonetheless, the Dow industrial average has dropped 166 points, or 4.2%, since Sept. 15 as investors’ concerns about higher interest rates have mushroomed.

Traders said it wasn’t clear if some single event sparked bargain hunting at midday Wednesday. But some noted that many technology stocks rebounded as takeover rumors boosted Apple Computer’s stock.

Among Wednesday’s highlights:

* Anticipation of higher rates hurt many economically sensitive issues. Caterpillar fell 7/8 to 53 1/4, Alcoa dropped 1 3/4 to 82 3/4, Scott Paper slumped 1 5/8 to 59 7/8, CBI Industries plunged 3 7/8 to 23 1/4 and Quanex sank 1 3/8 to 24 1/2.

But auto stocks rallied. Chrysler gained 1 1/8 to 45 1/8, GM added 1/2 to 45 5/8 and Ford gained 1/2 to 27 5/8.

* Airline and rail stocks were dumped. UAL, parent of United Airlines, fell 1 1/2 to 84 1/2, Delta lost 7/8 to 44 and CSX sank 1 1/2 to 65 7/8.

* In the tech sector, Apple surged 4 1/8 to 37 7/8 on takeover rumors. Other tech winners included Intel, up 3/4 to 58 3/4; Compaq, up 5/8 to 32 1/4; Dell Computer, up 2 1/2 to 38 7/8, and IBM, up 3/4 to 69 1/8.

Overseas, London’s FTSE 100 index tumbled 45.5 points to 2,956.3, its lowest since early July. Frankfurt’s DAX index dropped 26.23 points to 1,968.72. In Mexico City, the Bolsa index gave up 28.63 points to 2,641.39.

But in Tokyo the Nikkei average rose 182.94 points to 19,751.55.