FINANCIAL MARKETS : Stocks Tumble on Rate Rise; Dow Off 35.77 : Market Overview

The stock market plummeted Wednesday as profit-takers swarmed, reacting to three days of rising long-term interest rates.

* Investors continued to dump long-term Treasury bonds on fears that economic growth is picking up, and with it inflation. But shorter-term yields stabilized.

Stocks

The market’s slide, in a crush of trading, was exacerbated by computer program-triggered selling.

Still, traders said stocks were ripe for a setback anyway, after struggling against rising interest rates Monday and Tuesday.

Stocks opened weak on Wednesday, but heavy selling didn’t kick in until the final two hours of trading, as computerized program sales took over.

The Dow, off as much as 53 points in late afternoon, rallied back to close down 35.77 points, or 1%, at 3,661.87.

The selling wave triggered the New York Stock Exchange’s “uptick rule,” which restricts program-directed trading. That seemed to relieve some of the selling pressure late in the day.

Even so, investors were unquestionably in a down mood: Losers outnumbered winners 3 to 1 among NYSE stocks, on very heavy volume of 342.11 million shares.

The Nasdaq composite index of mostly smaller stocks slid 12.71 points, or 1.6%, to 772.95. “I think you can describe (Wednesday) either as a breather or say that the market is reflecting some concern about the strong economic data we have been seeing,” said Hugh Johnson, stock strategist at First Albany Corp.

While investors recently have been cheering the idea of a stronger economy by bidding up industrials, concern is also high that growth will continue to push interest rates up--which could make many stocks less appealing.

Analysts noted, however, that stocks historically have continued to gain in the early phases of rising interest rate cycles, because investors usually pay more attention to prospects of higher corporate profits than to rising rates.

Among Wednesday’s highlights:

* Utility stocks, which have been clobbered for weeks, took another hit. Higher bond yields make utility dividend yields less attractive.

The Dow utility index sank 2.6%, or 6.19 points, to 231.68. SCEcorp fell 3/4 to 20, San Diego Gas & Electric tumbled 1 5/8 to 24 3/4, American Electric Power lost 7/8 to 36 7/8, Con Ed sank 1 1/2 to 32 1/2 and Southern dropped 1 1/4 to 42 3/8.

* Financial stocks, also sensitive to higher interest rates, slumped. SunAmerica tumbled 2 1/4 to 38 1/2, Countrywide Credit lost 1 7/8 to 28, Wells Fargo dropped 2 3/8 to 108 3/8 and Merrill Lynch slid 2 3/8 to 90 7/8.

* Tech stocks were broadly lower on fears that the semiconductor industry’s orders may have slowed again in October. Micron Technology plunged 5 to 40 3/4, Texas Instruments plummeted 5 1/2 to 60 1/8 and Intel lost 1 7/8 to 60 7/8.

* Telecommunications stocks also fell. Pacific Telesis dropped 4 1/8 to 55. It had surged 4 7/8 on Tuesday after the stock spinoff of the firm’s cellular unit was approved. Brokerages Kidder Peabody and Smith Barney Shearson downgraded Pac Tel to “neutral,” saying the price reflected the expected value of the split companies.

* Industrial stocks were mixed. Alcoa fell 1 1/8 to 66 7/8, Caterpillar gave up 1 3/8 to 91 and Deere lost 2 1/2 to 74 1/2, but Inland Steel added 1/4 to 33, GM gained 1/4 to 49 1/4 and Bearings jumped 3/4 to 30 1/2.

* One of the few strong sectors was drugs, which rallied after brokerage Goldman Sachs upgraded the group. Bristol Myers advanced 7/8 to 59 7/8, Eli Lilly rose 1 to 55 3/8 and Merck jumped 1 1/8 to 32 7/8.

Overseas, many markets were lower. In Frankfurt, the DAX index fell 11.22 points to 2,084.36. In London, the FTSE-100 index eased 1.8 points to 3,162.3.

The Tokyo stock market was closed for a national holiday.

In Mexico City, the Bolsa index fell 20.21 points to 2,000.05.

Other Markets

Another wave of selling battered 30-year Treasury bonds, sending the bond’s yield to its highest level since Sept. 22.

The 30-year yield closed at 6.10%, up from 6.06% on Tuesday. It was 5.79% in mid-October.

Traders said bond investors continue to bail out on fears that the long decline in interest rates has come to an end. That feeling has been reinforced by statistics pointing to an economy that is picking up steam.

On Wednesday, traders said investors also reacted to the Treasury’s announcement of new note sales next week, which could put further upward pressure on yields.

The Treasury will sell $43 billion in new debt, including $17 billion in three-year notes and $12 billion in 10-year notes.

However, yields on shorter-term securities were mostly unchanged Wednesday, despite the 30-year yield’s climb. That suggested to some analysts that the market’s recent bearish tone is waning.

Meanwhile, gold and silver prices rose, benefiting from the selloff in stocks and bonds.

December gold futures on the New York Comex jumped $4.40 to $368 an ounce. Silver gained 11.7 cents to $4.30 an ounce.

Oil also rebounded. Light, sweet crude rose 37 cents to $17.49 a barrel on the New York Merc.

Market Roundup, D6