Earnings and Bond Woes Push Dow Down 17.44 : Market Overview

Highlights of Wednesday’s market activity, compiled from Times staff and wire reports:

* Treasury bond yields jumped amid diminishing hopes that the Federal Reserve will ease interest rates further. The yield on the key 30-year bond rose to 7.91% from 7.82% Tuesday.

* Stocks sold off on interest rate concerns and on another spate of bad corporate earnings projections--this time centered in the retail industry.

The Dow Jones industrial average fell 17.44 points to 2,946.33.

Stocks

Declining issues outnumbered advances 1,040 to 530 on the New York Stock Exchange, as the market resumed its troubled tone of recent weeks.

Big Board volume rose to 186.71 million shares, against 170.12 million Tuesday.

Most broader indexes fell more than the Dow’s 0.6% drop. The Standard & Poor’s 500 index lost 1%, off 3.87 points to 376.80.

Wednesday’s disappointments began with retailer Nordstrom, which shocked investors late Tuesday by announcing dismal September sales--another sign of a weak economy that refuses to show any real spark.

Nordstrom sank 8 1/2 to 33 3/4, dragging most other retail stocks down with it. (Story, below.)

“They tossed another log on the fire,” said Robert Walberg, analyst at MMS International. “We’ve had bad earnings, (market) breadth is weakening and now we have a sharply declining bond market.”

A major problem for the market now is that the Dow has fallen through the 2,950 mark--a level at which buyers have always rushed in since early July. If buyers fail to surface here, the Dow may be vulnerable to a much steeper decline, some technical analysts say.

Among Wednesday’s highlights:

* Except for retailers, investors didn’t target many broad industry groups for sale, but rather dumped specific issues. In the Dow index, the big losers were GE, off 1 5/8 to 65 3/8; Philip Morris, down 1 1/2 to 70 1/8, and Caterpillar, off 1 1/8 to 45.

Meanwhile, the Dow was helped by Allied-Signal, which soared 4 1/2 to 40 5/8 after it announced a major restructuring.

* Hospital and some other medical stocks weakened further, following Santa Monica-based National Medical Enterprises’ plunge on Monday on allegations of fraudulent billing at some of its psychiatric hospitals. NME dropped 7/8 to 16 3/4, despite saying it had begun to buy back shares to stem the plunge. Also weak was Community Psychiatric, down 3/8 to 15 3/8.

Meanwhile, Marquest Medical plunged 4 to 7 1/2. The maker of disposable medical supplies said it will suspend U.S.-based manufacturing to comply with changes that the Food and Drug Administration says it needs to make.

* San Diego-based S&L; HomeFed plunged 1 to 1/2 after the company said additional loan losses may wipe out all of its shareholders’ equity. Other weak financial stocks included Glenfed, off 3/4 to 6 1/4, and Wells Fargo, down 3 3/8 to 65 1/8.

* Merrill Lynch slumped 2 1/2 to 45. A newspaper report said federal regulators are looking into whether the broker engaged in illegal securities transactions with a Florida insurer. Merrill said it didn’t do anything illegal or unethical.

* Among the day’s big winners, Simi Valley-based computer tape drive maker Rexon jumped 1 5/8 to 7 after reporting quarterly earnings up 50%. Other Southland stock winners included software firm Logicon, up 1 to 34 1/2; document-management systems maker FileNet, up 1 1/4 to 19 3/4, and Unocal, up 3/4 to 26.

Overseas, Tokyo stocks surged just before the close on technical buying. The Nikkei average rose 329.64 points to 24,485.26.

Afternoon gloom overhanging the London market lifted a little by the close. The Financial Times 100-share average was off 15.4 points to 2,584.1.

In Frankfurt, concerns about the health of the German economy pushed the DAX average down 11.49 points to 1,567.22.

Credit

Long-term bond yields rose sharply as the Federal Reserve drained reserves from the banking system, apparently signaling that it was no longer pushing down the key federal funds rate.

The funds rate, the interest on overnight loans among banks, is a closely watched indicator of the Fed’s credit intentions. If it pushes the rate down, other interest rates often follow.

The central bank had been expected to ease credit further, to help the weak economy. But the reserves decision Wednesday spooked bond traders, who fear it may mean an end to interest rate declines for now.

Analysts said bond prices also suffered after the Treasury sold $9.28 billion in seven-year notes. While strong demand for the notes sent yields to their lowest level since 1987--7.2%--there were fewer-than-expected follow-up buyers when trading began.

Currency

The dollar fell against major foreign currencies in trading dominated by largely technical influences and uncertainty over the direction of U.S. interest rates.

The dollar fell to 129.80 Japanese yen in New York from 130.35 Tuesday and to 1.689 German marks from 1.706 marks.

Commodities

Oil prices advanced to their highest levels since the Persian Gulf War. (Story, D1.)

Elsewhere, gold rose on further news of dwindling Soviet gold reserves. A report in Tass said Soviet reserves are approaching 240 metric tons, lending credence to similar statements that were made earlier.

Gold on New York’s Commodity Exchange was $1.90 higher for December, settling at $362.10 an ounce; December silver was 2.8 cents higher at $4.11.

Market Roundup, D8