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Sharp Swings

Unexpected strength in the U.S. economy, indicated by a huge increase in new jobs, sent bond yields soaring and stocks falling. The markets were reacting to the prospect of higher interst rates, which would reduce corporate profits and discourage investors.

WHAT HAPPENED FRIDAY

All major indexes lost ground and sensitive interest rates immediately moved higher.

* Unemployment: The February jobless rate dropped to 5.5% from 5.8%. In addition, more than 700,000 jobs were created last month.

* Major stock indexes

(Index: Percentage drop)

S&P; 500: -3.08%

Dow Jones Ind. Avg.: -3.04

Wilshire 5,000: -2.90

Nasdaq composite: -2.69

Russell 2,000: -2.51

* Interest rates

Benchmark indicator: 1-day gain (percentage points)

30-year, fixed-rate mortgage: +0.25

1-year Treasury bill: +0.26

5-year Treasury note: +0.36

10-year Treasury note: +0.33

30-year Treasury bond: +0.26

THE LONGER VIEW

For the skittish bond market, still fearful of inflation, Friday’s move continues a recent trend. Yields on the 30-year Treasury bond, weekly closes since Aug. 25:

(see newspaper for chart)

March 1996: 6.72%

The Dow Jones industrial average’s 171.24-point drop was the third-largest in history by points, but in percentage terms was just 3.04%

5 BIGGEST POINT DROPS

(Date: Point drop)

10/19/87: 508.00 (22.61%)

10/13/89: 190.58 (6.91%)

3/8/96: 171.24 (3.04%)

10/26/87: 156.83 (8.04%)

1/8/88: 140.58 (6.85%)

OTHER DROPS

10/28/29: 38.33 (12.82%)

10/29/29: 30.57 (11.73%

HOW LARGEST MUTUAL FUNDS FARED

The largest equity funds fell less than the major indexes--except for a Vanguard index fund. The largest bond funds had very different fates, depending upon the kinds of bonds they held and their maturities.

Taxable Bond Funds

*--*

Fund 1-day change Yr-to-date change Franklin Cust. Govt. -1.17% -1.28% PIMCO Total Return -1.91 -3.12 Dean Witter U.S. Govt. -1.44 -2.12 Vanguard Fixed GNMA Port. -1.26 -1.22 Bond Fund of America -1.23 -0.88 AARP GNMA & Treasury -1.05 -0.91 Kemper U.S. Govt. Sec. A -1.35 -2.53 Vanguard Fixed Short-Term Corp.: -0.83 -0.37 Merrill Corp. High Income B -0.75 +2.20 Vanguard Fxd Long-term Corp.: -2.32 -5.60

*--*

Equity Mutual Funds

*--*

Fund 1-day change Yr-to-date change Fidelity Magellan Fund -2.33% -0.15% Investment Co. of Amer. -2.71 +3.46 Washington Mutual Inv. -2.86 +1.91 Vanguard Index 500 Port. -3.08 +3.28 Fidelity Growth & Income -2.87 +3.88 Fidelity Puritan -1.92 +2.12 Fidelity Contrafund -2.13 +1.75 Twentieth Century Ultra Inv. -3.03 +0.65 Income Fund of Amer. -1.94 +1.95 Vanguard Windsor -1.91 +2.48

*--*

Year-to-date percentage change figures include dividends.

Sources: Bloomberg Business News, TradeLine, Lipper Analytical Services

Researched by JENNIFER OLDHAM / Los Angeles Times