Stocks fell Monday as many investors sold holdings to take profits, evidently concluding that the health of third-quarter corporate balance sheets may not carry over into the next quarter.
The Dow Jones industrial average fell 39.38 points to 4,755.48. Last Thursday, the blue-chip average surged to a record 4,802.45, but slipped 7 points Friday.
Declining issues led advancers by a decisive 2-1 margin on the New York Stock Exchange. Big Board volume was less convincing at 329.73 million shares, down from 388.14 million on Friday.
Broad market indexes ended lower. The NYSE's composite index fell 1.51 points to 312.32. The Standard & Poor's 500-stock index declined 2.40 points to 585.06.
The Nasdaq composite index lost 2.52 points to 1,036.92. The American Stock Exchange's market value index slid 6.51 points to 525.16.
The initial catalyst for the sell-off was weakness in the U.S. bond and currency markets and in overseas stock markets. The yield on the 30-year Treasury bond closed at 6.39%, up from 6.35% on Friday.
The dollar fell against the German mark and the Japanese yen as political turmoil in France caused a flight to the mark. In late New York trading, the dollar ended at 1.3865 marks, down from 1.3976 on Friday, and at 99.85 yen, down from 100.35 on Friday.
Concerns about Quebec's upcoming secession vote rattled the Canadian financial markets, and the Toronto Stock Exchange composite index lost about 2.8% of its value.
Traders said Wall Street's sell-off was mostly a technical retreat.
While third-quarter corporate earnings are coming in generally strong, some nervousness about economic growth in the fourth quarter and early next year gave investors a reason to sell.
"Many of the things that we own, which have enjoyed very nice earnings, are beginning to drift away in price," said Cummins Catherwood, a managing director at Rutherford, Brown & Catherwood in Philadelphia. "People are saying . . . it can't go on forever. There's a building Angst in the marketplace."
Weakness in the economy has been showing up lately in declining industrial production, falling auto sales, soft sales at retail store chains and declining commodity prices, said Don Hays, market strategist at Wheat First Butcher Singer in Richmond, Va.
Among Monday's highlights:
* Kmart lost 3/4 to 9 1/8 in leading volume of 5.6 million shares on the NYSE. Sears fell 7/8 to 35 1/8.
* Economically sensitive stocks lost ground amid pessimism about the economy. The Dow industrial components were led lower by Alcoa, which fell 2 3/4 to 48 3/8; United Technology, down 2 3/8 to 85 3/8, and AlliedSignal, off 1 1/4 to 42 7/8.
* Financial services firms, which are sensitive to rising interest rates, were mostly lower, as a drop in bond prices pushed rates higher. J.P. Morgan, a Dow index component, slid 1 1/8 to 75 5/8.
* Several oil stocks lost ground, even after the companies reported healthy earnings. Exxon fell 3/4 to 75, Mobil fell 1/4 at 101 1/2 and Amoco lost 1 3/4 to 63 5/8, but Texaco rose 3/8 to 67.
* Technology stocks moved broadly higher. On the Big Board, IBM rose 3 1/2 to 98 7/8 and Digital Equipment rose 1 1/8 to 52 7/8. In Nasdaq trading, Intel gained 3/8 to 67 1/2 and Microsoft added 7/8 to 96 3/8.
The gains in technology issues encouraged Eugene Peroni, director of technical research at Janney Montgomery Scott in Philadelphia, who said that these stocks have provided market leadership all year.
But it was a bad sign to Larry Rice, chief investment officer at Josephthal, Lyon & Ross, because it means so-called hot money is flowing to those issues and will not necessarily remain there, Rice said.
In overseas trading, Korean stocks plunged amid concern that a slush fund scandal swirling around former President Roh Tae Woo could have a wide-reaching impact on the country's political and business circles, traders said. State prosecutors said Monday that Roh holds nearly $60 million of secret slush funds in pseudonym bank accounts. The Korea composite stock price index fell 23.11 points, or about 2.3%.
In Tokyo, the 225-share Nikkei average index ended down 1.09 points at 18,156.24. In London, the FTSE-100 index fell 19.9 points to close at 3,531.5.
In Mexico, the Bolsa index ended down 44.02 points at 2,285.40.
Market Roundup, D8