Stocks Retreat in Selling Wave; Dow Loses 19 : Market Overview

* Anxiety over rising interest rates combined with profit taking depressed stock prices Thursday, and the market finished broadly lower.

* Bond yields soared, and that sent prices tumbling on several signs that the economy is improving.

Stocks

The selling was spread throughout the market and affected big name companies and smaller issues as well. Indicators of stock performance reflected the broad nature of the downturn.

After recovering slightly in the final minutes of trading, the Dow Jones industrial average fell 19.01 to close at 3,685.34. At its lowest, the blue-chip gauge was down more than 36 points as computer-guided programs intensified the selling.

In the broader market, declining issues outnumbered advancing ones about 8 to 5 on the New York Stock Exchange. On the Big Board, volume came to 313.49 million shares, down from 319.57 million shares traded Wednesday.

Investors unloaded equities to collect profits, amid relief over the U.S. House of Representatives approving the North American Free Trade Agreement.

A big negative for stocks was the rise in bond yields. Low rates have been the chief force behind the stock market’s prolonged advance. Poor returns on interest-bearing investments have sent money pouring into stocks, but analysts are concerned that rising rates could cut that flow of funds.

Among the market highlights:

* One of the most active Big Board issues was blue chip Chevron, which skidded 4 to 89. Pennzoil, one of Chevron’s major share holders, said it sold about half of its stake in Chevron. Pennzoil rose 5/8 to 58 1/8.

* Texaco fell 1 to 65 3/4 and British Petroleum tumbled 1 1/4 to 60 3/4.

* Frequency Electronics dropped 2 5/8 to 5 1/8 after it disclosed that a federal grand jury has charged it with defrauding the federal government on various defense contracts.

* Motorola fell 4 1/8 to 95 5/8 on heavy volume. Northern Telecom rose 1 5/8 to 29 1/8 after a Salomon Bros. analyst raised the stock’s investment rating to “buy” from “hold.”

* Boeing, which won a $2.5-billion order from Southwest Air, fell 1 5/8 to 39 1/8.

* AMR declined 7/8 to 69 after flight attendants struck American Airlines.

* Among telecommunications stocks, Swedish company Ericsson fell 7 7/8 to 42 5/8 in heavy trading on the Nasdaq, after it reported disappointing earnings. DSC Communications dropped 4 to 58; Tellabs lost 2 3/4 to 60 3/4.

* In Mexico City, stocks closed higher Thursday. The Bolsa index ended 17.68 points higher, at 2,166.18.

In Germany, the DAX-30 average closed up 13.62 points at 2,085.34. Japan’s Nikkei-225 average gained 57.61 points, to close at 18,166.32. London’s Financial Times 100-share average ended at 3,125.5, up 5.5 points.

Other Markets

Pressure on bond prices began first thing in the trading day, as the Labor Department reported a an unexpected decline in first-time claims for unemployment benefits.

The Treasury’s 30-year bond yield shot up to 6.24% from 6.17% late Wednesday, pushing the long bond’s price, which moves in the opposite direction, down 7/8 point, or about $8.75 per $1,000 in face value.

The government said that applications for jobless pay fell by 20,000 last week, after the previous week’s jump lifted the number to a 15-week high. Many economists had predicted that new unemployment claims would drop by about 2,000.

Also, the Federal Reserve Bank of Philadelphia released its monthly manufacturing sector index showing improvement in that critical economic area.

The federal funds rate, the interest on overnight loans between banks, was quoted at 3%, up from 2.938% late Wednesday.

In other markets:

* The dollar moved up slightly on a variety of factors, including the NAFTA vote in Congress, positive signals for the U.S. economy and an expectation of falling interest rates in Europe.

* Gold fell 40 cents to $376.40 an ounce on the New York Comex. Silver for current delivery closed at $4.671 an ounce, up 7 cents from Wednesday.

* Light, sweet crude oil for December delivery fell 35 cents, settling at $16.69 a barrel on the New York Merc.

Market Roundup, D6