Worries About Economy Send Stocks Falling : Markets: The Dow took its biggest one-day drop since April and the 30-year bond yield rose to a three-week high.

Stock and bond prices plummeted on Wall Street on Monday, as stocks marked their biggest one-day drop in five months and the long bond’s yield settled at its highest in nearly three weeks.

In its biggest one-day fall since April, the Dow Jones industrial average closed down 37.45 points at 3,575.80, while the Treasury’s 30-year bond yield shot up to 6.10% from 6.04% at Friday’s close.

The stocks of companies most sensitive to the economic cycles were the hardest hit as investors worried about the economy.

Stocks seesawed early in the day, mirroring bonds, then both headed steadily lower. The Dow closed near its lows for the day as waves of computer-guided program selling hit the market.

The lack of market-moving news Monday convinced many investors to sell bonds and lock in profits from the price rally.

The 30-year bond’s price, which moves inversely to its yield, plunged 13/16 point, or $8.13 per $1,000 in face value.

In the past six sessions, long bond’s yield has jumped more than 0.20 percentage point, retracing nearly half of the steep yield decline recorded during the powerful summer rally.

Investment strategist Ron Hill at Brown Bros. Harriman said a jump in oil prices also hurt bonds and stocks. “It’s another one of these days where stocks are following bonds in near-term direction,” he said.

Also pushing stocks lower on Monday was a creeping concern about the economy and a sense that stocks may be too expensive, said Alfred Goldman, director of technical market analysis, with A.G. Edwards & Sons.

And Michael Metz, an investment strategist at Oppenheimer & Co., said that investors were concerned about corporate profits.

“Market watchers aren’t thrilled with the performance of the market recently or the economy,” Metz said. “There’s a growing fear that corporate profit expectations are too high.”

Contributing to that sentiment, Metz said, is the recognition that with the economy still sluggish and with little space for price increases, companies must depend upon productivity to improve profits.

Paul Hennessey, a vice president in trading at Boston Co., said apart from the soggy bond market, “it (the stock market) was due for a correction.”

Overseas stocks provided little support for U.S. share prices. Frankfurt’s 30-share DAX was up 30.85 points to close at 1,912.84. In Tokyo, the 225-share Nikkei average fell 125.01 points to end at 20,266.03, and London’s Financial Times 100-share average dipped 1.0 to 3,004.5.

In the broader market, declining issues outnumbered advances about 4 to 3 on the New York Stock Exchange. Big Board volume retreated to 231.13 million shares, down from Friday’s 381.37 million.

Among the market highlights:

* Alcoa lost 2 3/4 to 68 3/4 and International Paper was off 1 1/2 to 61 3/8.

* Analysts said drug stocks reflected worries over President Clinton’s speech on health care reform, set for Wednesday.

* National Health Labs was the NYSE’s most active stock, falling 1 7/8 to 15 1/8. The company’s billing practices are reportedly under investigation by a government agency.

* Glaxo rose 1/2 to 20. The company won a lawsuit to protect its U.S. patent on an ulcer drug.

* Time Warner was unchanged at 41 5/8. Time Inc. launched another restructuring, mostly of its magazines and publishing business in an attempt to cut costs.

* Paramount Communications rose 1 1/4 to 69 3/4 on speculation of a rival bid from QVC Network. Paramount has agreed to merge with Viacom in a $8.2 billion deal.

* Nike fell 1 3/4 to 46 1/4. The company reported fiscal first-quarter earnings of $1.49 a share compared to $1.60 a share a year earlier.

* Motorola dropped 2 to 93 3/4.

* Oracle Systems added 2 to 54 5/8. SoundView upgraded its rating on the firm to short-term buy from hold, citing expectations of a strong first quarter. Intel rose 7/8 to 65 1/8.

* Rehability Corp. sank 3 1/2 to 9 1/4. The outpatient rehabilitation company said third-quarter profits will be below Wall Street expectations.

In the credit markets, the federal funds rate, the interest on overnight loans between banks, was 3.125%, up from 3% late Friday.

Currency

The dollar rose against the Japanese yen as the Japanese media reported an imminent cut in interest rates. The greenback was mixed against other currencies.

The dollar fell against the yen during Asian trading after Japanese media reported that the country’s central bank planned to lower a key interest rate, the discount rate, by half a percentage point, to 2.0%. That was considered a small cut.

Later, a press report predicting a cut of 0.75 percentage point prompted the dollar to turn around and rally against the yen, currency traders said.

A larger cut in the discount rate would be interpreted as a sign that Japan was trying to stimulate its economy and ease trade tensions with the United States, traders said. If those tensions persist, traders believe that U.S. policy makers will encourage a stronger yen. A rising yen makes Japanese exports more expensive, and foreign imports to the country cheaper.

The U.S. dollar closed at 104.67 Japanese yen in New York, up from Friday’s 104.47.

The dollar rose against the German mark early in the day, but lost steam when it couldn’t break through the level of 162.50, traders said. It then drifted lower to close at 1.612 marks, down from 1.615 marks.

The British pound finished at $1.532, more expensive than $1.531.

Commodities

Crude oil futures spouted to a two-week high as traders lost hope for lower prices ahead of this weekend’s Organization of Petroleum Exporting Countries meeting.

Crude rallied 63 cents to $17.70 a barrel on the New York Mercantile Exchange, where players scrambled to cover positions ahead of OPEC meetings this weekend and seasonal demand.

The 12-nation Organization of Petroleum Exporting Countries will meet this weekend to plan fourth-quarter strategy. Traders were betting that the low prices might cure the discord that has prevented OPEC from successfully capping production.

“The more crude prices fall, the more likely it is that OPEC will be able to act more as a cartel,” said analyst Thomas Blakeslee of Brody, White and Co. in New York.

Blakeslee said the market also must contend with a seasonal upswing in demand for oil as the winter heating months approach.

Elsewhere, gold for current delivery rose on the New York Commodity Exchange to $353.50 an ounce, up $2.70 from Friday. Silver for current delivery closed at $4.093 an ounce, up 5 cents from Friday.

Market Roundup, D8