Dow Retreats 29.34 in Face of Growing Inflation Jitters

NEW YORK —  Stock prices fell sharply in a broad selloff Thursday but managed to stem their decline at the 2,000 mark of the Dow Jones industrial index.

The retreat carried the Dow index 29.34 points lower at the close to 2,002.31.

Earlier there had been similar setbacks in Tokyo and London, where inflation and interest rate jitters took a toll.

Declining issues outnumbered advances by about 3 to 1 in nationwide trading of New York Stock Exchange-listed issues. Big Board volume rose to 144.09 million shares from 130.48 million in the previous session.

“The Japanese market could be vulnerable to further losses, and the Japanese could begin to repatriate some of the capital they have invested here,” said Michael Metz of Oppenheimer & Co. “They are big exporters of capital.”

Japanese investors fear that their government will have to raise interest rates if the yen falls further against the dollar. The dollar eased in New York to 136.30 yen from 136.50 after a sharp gain the day before.

Stocks fell from the opening, taking their cue from Tokyo, where the Nikkei 225-share index had fallen 431.69 points to close at 26,934.26. It sank 145.70 points on Wednesday.

London’s Financial Times 100-share index, which fell 1.2 points Wednesday, closed off 23.1 points to 1,730.5.

Analysts said concern was spreading among traders that a rising dollar in foreign exchange would prompt Japanese officials to increase interest rates.

Some analysts figured the market established a base when it hit 2,000, near the lowest level of the past three months, although the market’s direction after Thursday’s decline was unclear.

Many participants in the New York market were sidelined ahead of today’s unemployment report for August. Advance estimates on Wall Street generally call for an unemployment rate of 5.4%, unchanged from July, and at least a modest slowing in the growth of payroll employment.

There has been some hope lately that the figures would show a moderation of job growth, thus relieving some pressure for credit-tightening by the Federal Reserve.

But some analysts noted fears that any surprises in the report could upset the markets.

Metz also said the U.S. stock market was “very nervous and there’s no reason to buy aggressively prior to the Labor Day weekend.”

Also undermining stocks was a decline in the bond market, although losses there were modest. The benchmark 30-year bond eased 1/32 to 98, pushing its yield up to 9.31% from 9.30% on Wednesday.

“The computer group and high-tech group were weak again,” said Eldon Grimm, stock market analyst with Birr Wilson & Co. Disaster stories have been hitting the group--the latest being software-related products maker Digital Communications Associates Inc., which plunged 4 3/8 to 21 1/8. Late Wednesday, the company said its revenue for the current fiscal quarter might be down 15% to 20% from the quarter ended June 30.

Losers among the blue chips included International Business Machines, down 1 at 110; Exxon, off 5/8 at 45 7/8; American Telephone & Telegraph, losing 1/2 at 24 3/8; General Electric, down 1/2 at 39 7/8, and General Motors, off 1 at 71 7/8.

Macmillan dropped 1 3/8 to 80 1/2 on concern the company would make a friendly deal with suitor Robert Maxwell, following a similar decline the day before.

Shares of Zenith Electronics Corp. fell 1/2 to 20 3/4 on a report that Brookhurst Partners L.P. held inconclusive talks with a potential buyer of Zenith’s computer products.

Technology issues traded in the over-the-counter market were broadly lower. Intel fell 1 to 26 3/4, Apple Computer lost 1 to 38 7/8, Microsoft dropped 1 1/8 to 48 7/8,; Ashton-Tate slipped 5/8 to 23 1/8 and Sun Microsystems dipped 7/8 to 37 3/4.