Pessimism Pulls Dow Off 13.64; Mexico Gains : Market Overview

* U.S. stocks fell for a third straight day amid continuing worries about the economy and a general feeling of uncertainty. The Dow Jones industrial average dropped 13.64 points to 3,274.12, following Wednesday’s 41.73-point loss.

* European stocks also slumped, but the Mexico City market rebounded 2.6% from its 6% plunge of Wednesday.

* Bond yields slipped again on growing hopes that stocks’ weakness will lead to another Federal Reserve interest rate cut.

Stocks

Though the loss in the Dow index was relatively small, the broad market continued to be pounded: Losing issues outnumbered winners by more than 2 to 1 on the New York Stock Exchange.

Heavy trading volume also suggested that many investors were trying to exit the market. NYSE volume totaled 225.60 million shares, versus Wednesday’s 243.34 million.

U.S. stocks had to contend with a spillover effect from Europe, where most major indexes slumped. In London, the Financial Times 100-share index tumbled 35.7 points, or 1.4%, to 2,562.7. In Paris, the CAC-40 index fell 17.04 points, or 0.9%, to 1,891.80.

U.S. traders said investors remain fixated on worries about the slow recovery. There is a growing fear that corporate earnings this year won’t match the high expectations built into many stocks’ prices. So the easy decision is to sell, traders note.

“The economic news has been nothing more than a creepy-crawl type of upward bias,” said Tony Cecin, head of trading at brokerage Piper Jaffray Inc. in Minneapolis. “I just think people don’t know what to do. When they don’t know what to do and stocks start selling off, they get very nervous.”

The Dow was off 19 points in early trading, recovered to about even by midday, then sank again the final hour. With Thursday’s loss, the Dow is down 80.24 points for the week, or 2.4%.

Traders said the market has also been suffering in advance of today’s quarterly expiration of key stock index futures and options contracts. The computerized trading games that accompany these expirations can cause wild swings in the market. Thus, many potential buyers are avoiding stocks for now, which allows selling pressure to become exaggerated.

Even so, analysts noted that selling has been heaviest in the smaller NASDAQ stocks that aren’t affected by futures and options trading. The NASDAQ composite index fell 4.07 points to 549.17. Its loss for the week so far is 3.6%.

The news was better from Mexico City: The Bolsa stock index jumped 40.90 points, or 2.6%, to 1,634.19, stabilizing after losing 12% of its value the first three days of the week. NYSE-traded shares of Telmex, the Mexican phone company, rose 1 5/8 to 47 after falling 3 1/8 Wednesday.

Traders said domestic and foreign investors were attracted by perceived bargains in the fledgling Mexican market, though many analysts remain concerned about an expected slowdown in the Mexican economy this year. Also, likely U.S. presidential candidate Ross Perot’s opposition to the proposed U.S.-Mexico free trade agreement--the trigger for this week’s plunge in Mexican stocks--remains an overriding worry, traders said.

Tokyo stocks recovered somewhat by midday today after losing 400.24 points, or 2.4%, on Thursday to 16,045.56--the lowest finish since 15,810.55 on Oct. 22, 1986. At midday today, the Nikkei was up 229.33 points to 16,274.89.

Among U.S. market highlights:

* The loser’s list was dominated by many industrial stocks that had run up this year on expectations of a healthy recovery. Conrail slid 2 1/2 to 88, Cummins Engine plunged 4 3/8 to 68, Alcoa lost 2 7/8 to 74 1/8, Dow Chemical fell 2 3/8 to 57 1/2, and Reynolds Metals sank 2 1/8 to 60.

But some investors flocked to a few industrial names still perceived to be bargains. GM gained 1 1/8 to 42 3/4, Chrysler leaped 1 1/4 to 21 1/8, and IBM jumped 1 7/8 to 94 1/2. Merrill Lynch raised its 1992 earnings estimate for IBM to $7.25 a share from $7, citing the company’s cost-cutting program.

* Advanced Micro Devices collapsed 5 3/4 to 8 3/4 after a California jury ruled late Wednesday that AMD may not copy a key piece of Intel’s microprocessor technology. Intel soared 3 1/4 to 51.

Elsewhere in the tech sector, personal computer stocks continued to plummet. Dell Computer tumbled 5 3/8 to 15 3/4 after it announced big price cuts on its personal computers to battle lower-priced models from rival Compaq. Compaq fell 1 to 23 3/4, Apple sank 2 1/4 to 45 1/4, and AST Research dropped 3/4 to 13 1/2.

* Many health care stocks remained under pressure. SciMed Life lost 2 1/4 to 50 1/2 after reporting that earnings fell in its first quarter.

* Among Southland issues, security services firm Pinkerton’s plunged 5 3/4 to 16. The firm said current-quarter earnings will be “significantly” below targets because of softening demand for security guards. Also, Kaiser Steel Resources tumbled 3 3/4 to 10 after it said Riverside County refused to make land-use changes needed for Kaiser’s proposed rail-haul waste landfill at Eagle Mountain.

Credit

Bond yields continued to slide bit by bit, as expectations of a slow recovery encouraged hopes for lower interest rates.

The price of the Treasury’s 30-year bond was up 1/4 point, or about $2.50 per $1,000. Its yield eased to 7.80% from 7.82% Wednesday.

The Labor Department said the number of Americans filing new claims for unemployment benefits dropped just 2,000 to 407,000 during the first week in June.

That news, along with stocks’ weakness, suggested that chances are improving for another Federal Reserve interest rate cut.

The federal funds rate, the interest on overnight loans between banks, was 3.688%, unchanged from Wednesday.

Currency

The dollar settled lower against most major currencies as traders awaited results of a European unity vote in Ireland.

In New York, it closed at 126.80 Japanese yen, down from 127.25 Wednesday, and 1.567 German marks, down from 1.575.

Commodities

Platinum futures dropped on traders’ fears of a further slowdown in the Japanese economy. Platinum is used in many industries.

Platinum for July fell $3.50 on the New York Merc to $358.40 an ounce, lowest since May 18.

On New York’s Comex, June gold rose $1.40 to $342.60 an ounce, and July silver 0.2 cent to $4.09. Elsewhere, light, sweet crude oil for July lost 3 cents to $22.26 a barrel on the New York Merc.

Market Roundup, D6

How Markets Fared

U.S. and British stocks continued to slide Thursday after Wednesday’s large drop, while the Mexico City market rebounded slightly. THURSDAY TRADING:

Tokyo: -400.24 Nikkei: 16,045.56

New York: -4.07 NASDAQ: 549.17

London: -35.7 FTSE 100: 2,562.70

Mexico: +40.90 Bolsa: 1,634.19