Dow Falls 36.58 on Comments by Analyst; Bond Yields Up

Market Overview * Blue-chip stocks dropped sharply on fears that the market might still be on shaky ground after last Friday’s dizzying plunge.

* The bond market’s preoccupation with inflation sent yields rising, overshadowing strong demand at the Treasury’s first auction in six months of new 30-year securities.

Stocks

The Dow Jones industrial average finished off 36.58 points at 3,895.34. In the broad market, declines led advances 1,305 to 811 on heavy volume of 325 million shares on the New York Stock Exchange.

Analysts said Wall Street was shaken by Lehman Bros. analyst Elaine Garzarelli’s comments on CNBC-TV. She said that, while she remains bullish on the market, she sees a correction of perhaps 4% to 7% coming at any time. Garzarelli is well known for having predicted the 1987 stock market crash.

Analysts said investors also took profits ahead of today’s release of the producer price index for January.

And they said the market’s fall stemmed from computer-generated “sell” programs, weakness in utility stocks and the failure of General Motors’ stock to rally after the company posted strong earnings for the last quarter and all of 1993.

Among the trading highlights:

* Shares of Detroit’s auto makers were under pressure after GM’s earnings report. GM fell 1 3/4 to 62 1/2, Chrysler dropped 1 5/8 to 59 3/4 and Ford dipped 2 1/2 to 66.

* Other economically sensitive cyclical stocks slipped on profit taking. Deere dropped 1 3/4 to 79 5/8; DuPont fell 1 to 54.

* Among utility stocks, Houston Industries shed 7/8 to 43 3/8 and American Electric Power dropped 3/4 to 33 5/8.

* Broderbund surged 4 5/8 to 45 7/8 and Electronic Arts leaped 3 1/2 to 29 after the two software companies said they were merging in a $400-million stock swap.

In overseas trading, London shares closed lower, with the Financial Times 100-share index down 22.1 points at 3,407.0. In Frankfurt, the German DAX index ended at 2,118.96, up 33.67 points on the day. In Tokyo, the Nikkei average closed up 149.32 at 19,990.70.

Credit

By day’s end, the price of the Treasury’s main 30-year bond had fallen 9/16 point, or $5.63 per $1,000 in face value. Its yield, which moves in the opposite direction from the price, rose to 6.45% from 6.40% on Wednesday.

Bond prices were slightly lower in cautious, early trading ahead of the afternoon auction of $11 billion in new bonds, the third and final leg of a Treasury refunding that started Tuesday.

Results of the auction showed strong demand for the new securities from Wall Street firms, which underwrite the sales. The bid-to-cover ratio, a measure of demand comparing the number of bids offered to those received, was 2.78 to 1, up from the average of 2.23 to 1 in the previous 12 auctions.

Analysts attributed the strong sales in part to the fact that the Treasury last spring reduced the frequency of 30-year auctions from four times to twice yearly as part of a shift toward shorter-term securities. That has created a higher perceived value for the bonds, since fewer bonds are offered for sale.

Currency

The dollar finished mixed against other major currencies in light, technically driven trading, as investors awaited the outcome of a tense standoff in the U.S.-Japan trade talks.

In New York, the dollar finished at 108.25 yen, down from 108.35 on Wednesday. The British pound rose to $1.4625 from $1.4615 on Wednesday.

Other dollar rates in New York, compared to late Wednesday: 1.7535 German marks, down from 1.7590; 1.4798 Swiss francs, up from 1.4765, and 5.9570 French francs, down from 5.9685.

Commodities

Near-term heating oil deliveries rebounded strongly from Wednesday’s decline on the New York Mercantile Exchange, as bitterly cold conditions returned to the Northeast.

Light, sweet crude oil fell 4 cents to $14.56 a barrel; March heating oil rose 0.91 cent to 50.31 cents a gallon.

Precious metals weakened on New York’s Commodity Exchange, following the stock market. February gold dropped $2 to $382 an ounce; March silver slipped 1.5 cents to $5.32 an ounce.

Market Roundup, D6