FINANCIAL MARKETS : Dow Stumbles in Anticipation of Report on Inflation : Market Overview

* Stocks ended with minor losses as investors focused on the release today of May wholesale inflation numbers, and on a downbeat earnings forecast from giant 3M Co. Trading volume was subdued.

* A stable bond market allowed companies to rush out more than $2 billion in new bonds, moving to lock in some of the lowest interest rates in a generation.

* The dollar eased amid expectations of weaker U.S. growth.

Stocks

The market continued its pattern of recent days, showing little conviction ahead of today’s inflation report.

The Dow industrials dropped 20.21 points to 3,491.72--the first close below 3,500 since May 21. But much of the Dow’s loss was caused by a sharp decline in shares of industrial and consumer products giant 3M Co.

3M said earnings in the current quarter will be ahead of last year’s $1.45 a share but below earlier expectations. The firm, citing “slowing U.S. growth,” said it is more comfortable with estimates of $1.50 a share for the quarter.

3M’s stock, the highest-priced issue in the Dow, slid 10 to 105 3/4.

Overall, losers topped winners by 10 to 8 on the New York Stock Exchange, on moderate volume of 232.6 million shares.

James Solloway, director of research at Argus Research Corp., said 3M is a bellwether of the economy, and thus could signal earnings problems at many other companies this quarter.

Of more immediate concern, however, is today’s inflation report. Estimates call for the Labor Department’s producer price index to be unchanged for May, with the core index, which excludes food and energy, rising a modest 0.2%.

After two surprisingly high inflation reports in March and April, investors fear that a higher than expected number this time could cause the Federal Reserve to tighten credit for the first time in several years.

Because the stock market has derived so much fuel from low interest rates, investors worry that an upturn in rates would spell the beginning of the end of stocks’ bull market.

Among Thursday’s highlights:

* Transportation stocks were among the session’s losers, apparently hurt by speculation that an increase in transportation fuel taxes will be offered as an alternative to President Clinton’s broader energy tax proposal.

Among airlines, AMR, parent of American Airlines, dropped 1 to 67; USAir fell 7/8 to 18 3/4; Southwest slid 7/8 to 42 3/8, and United Airlines’ parent, UAL, shed 1 1/8 to 129 3/4.

Meanwhile, trucking firm Roadway Services slumped 1 3/4 to 52 1/4 and Yellow Freight sank 1 1/4 to 18 3/8.

* Sellers chipped away at technology stocks on new worries about personal computer price wars. Compaq fell 1 1/4 to 52 1/2, AST Research eased 3/8 to 14 3/4, Sun Microsystems lost 3/4 to 29 3/4, Lotus slid 1 1/4 to 33 1/2 and Cirrus Logic gave up 1 3/8 to 18 1/8.

But Apple, which plunged Wednesday after signaling new PC price cuts, added 1/4 to 44 1/2.

* Helene Curtis tumbled 5 1/2 to 28 after saying earnings in the quarter just ended will be lower than expected. The personal products maker blamed intense competition.

* Andrea Electronics, traded on the Amex, plummeted 9 5/8 to 31 7/8. The firm, which holds patents on noise-reduction technology for telephones, said the Securities and Exchange Commission is conducting an informal inquiry into the wild trading activity in its stock.

* Investors appeared to turn more friendly toward stable consumer growth companies, perhaps because of growing worries about the economy. Coca-Cola, for example, gained 1 1/8 to 41 while Pepsico rose 3/4 to 35 5/8.

Also, drug stocks were broadly higher. Pfizer rose 1 3/8 to 70 3/4, Bristol-Myers gained 1 1/4 to 59 1/2, Merck added 7/8 to 37 5/8 and Upjohn was up 7/8 to 30 3/8.

* In the new-issues market, California winery Robert Mondavi closed at 13 1/8 on NASDAQ after going public at 13 1/2 a share Wednesday.

Overseas, London’s FTSE-100 index eased 6.9 points to 2,860.0. The Frankfurt bourse was closed for the Corpus Christi holiday and will reopen today.

In Tokyo, the Nikkei average lost 81.92 points to 20,493.32.

Credit

While the stock market showed apprehension about today’s inflation report, the bond market seemed oblivious. Interest rates were mostly unchanged, although trading was very light.

The yield on the Treasury’s main 30-year bond yield slipped to 6.87% from 6.88% on Wednesday.

But there was one sign that corporations, at least, expect interest rates to be higher in the near future: Corporate bond issuance continued at a heavy pace as companies rushed to lock in current yields.

Thursday’s surge in corporate bond offerings brought the total since last Friday to nearly $8.5 billion, making this week so far the third-busiest of the year.

“It’s been stepped up largely in response to the expectation that higher rates are on the way,” said John Lonski, senior economist at Moody’s Investors Service.

Thursday’s biggest corporate bond issuer was Allstate Corp., which is 80% owned by Sears, Roebuck & Co. The $850-million offering of various maturities was priced by a group of dealers led by Goldman, Sachs & Co.

Other Markets

The dollar edged down to another all-time low against the Japanese yen, closing in New York at 106.16 yen, down from Wednesday’s 106.45.

Traders said there is growing sentiment that the U.S. economy is slowing further, which would be a negative for the dollar.

The dollar’s decline against the yen was also traced to speculation that trade talks between the United States and Japan will not be favorable for the U.S. currency.

Against the German mark, the dollar eased to 1.630 from 1.636.

Elsewhere, gold declined for the fourth consecutive day on the Comex in New York. Gold for current delivery fell $1.90 an ounce to $369.60.

Silver eased 3.4 cents to $4.30.