FINANCIAL MARKETS : Dow Drops 26.23 in Broad Market Retreat

NEW YORK â€”  The stock market declined broadly in sluggish trading, showing no carry-over of the sharp rally that it staged last week.

The Dow Jones index of 30 industrials, which had gained a record 119.88 points last week, dropped back 26.23 to 2,662.91.

Declining issues outnumbered advances by about 2 to 1 in nationwide trading of New York Stock Exchange-listed stocks, with 501 up, 1,012 down and 458 unchanged.

Big Board volume came to 135.86 million shares, down from 164.83 million in the previous session.

Analysts said traders were expecting more evidence in the next several days of sluggish growth in the economy, perhaps setting the stage for lower interest rates.

But many observers on the Street have also voiced increasing concern lately over what that prospect means for corporate profits.

Charles Jensen of MKI Securities said investors bought consumer issues likely to weather an economic downturn and sold stocks in industries prone to earnings disappointments during a downturn.

Phillips Petroleum fell 1 1/8 to 23 1/8 following the news of explosions and fire at a Phillips plastics plant near the Houston Ship Channel in Texas.

Pinnacle West, the most active NYSE issue, dropped 1 5/8 to 9 1/8. The company said it might consider filing for Chapter 11 bankruptcy protection if it can’t work out a plan with regulators to help out its troubled Merabank subsidiary.

The Tokyo stock market rallied for the fifth straight day, buoyed by a stable Japanese yen and a recently steady Wall Street. The 225-share Nikkei index rose 99.14 points to close at 35,585.52. Winners led losers by 7 to 5 on light volume of 600 million shares.

Share prices remained firm on the London Stock Exchange in exceptionally quiet trading with many traders sidelined ahead of today’s release of British trade data for September. The Financial Times 100-share index closed up 10.6 points at 2189.7.

Credit

Bond prices rose in tandem with the stock market’s decline, following a pattern established in the Friday the 13th stock market tumble.

Treasury bond prices rose about 1/2 point and the Dow fell 26 points. That was a faint echo of Oct. 13, when bonds rose 4 points and the Dow index fell about 190 points.

The late afternoon sag on Wall Street was the only big news in the bond market, which had been flat to slightly higher in light dealings for most of the session.

At the end of the day the Treasury’s benchmark 30-year bond was up 9/16 point, or about $5.60 per $1,000 face amount. Its yield, which falls when prices rise, was at 7.93%, down from 7.98% late Friday.

In the secondary market for Treasury bonds, prices of short-term governments were up 1/8 point to 1/4 point, intermediate maturities gained almost 1/2 point and long-term issues gained slightly more than 1/2 point, according to Telerate Inc., the financial information service.

The movement of a point is equivalent to a change of $10 in the price of a bond with a $1,000 face value.

The Shearson Lehman Hutton daily Treasury bond index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, was up 3.44 to 1,191.07.

The federal funds rate, the interest on overnight loans between banks, was quoted at 8.875%, down from 8.688% late Friday.

Tables begin on D13