Stocks Plunge as Traders Race Calendar : Markets: With first-quarter ending, selling accelerates. Bond yields maintain their upward trend.

Stocks and bonds suffered another day of big losses, as rally attempts brought out more sellers and as the approach of the holiday weekend increased fund managers’ urgency to trim holdings.

The Dow industrials, which opened the day with a 50-point loss, managed to rally to nearly even by midday. But in the final hour of trading the selling ballooned again, and the Dow closed down 72.27 points at 3,626.75, its lowest close since Nov. 4.

In the bond market, the yield on 30-year Treasury bonds zoomed to a 13-month high of 7.10% from Tuesday’s 7.06%, though shorter-term yields were slightly lower.

Yields on mortgage-backed bonds also surged, as that sector of the bond market became the latest victim of the problems of major “hedge funds,� which have wracked up huge losses this year on wrong-sided bets in stock, bond and currency markets.

Stock market traders said Wednesday’s losses were the work of portfolio managers who have been late selling in this decline, and who want to lighten up their positions before the first quarter ends today.

Also, with most markets closed on Good Friday, many big traders are unwilling to carry heavy stock positions over the three-day weekend--especially with the government reporting Friday on March employment. Traders fear that a strong March gain in jobs will fuel new inflation fears, driving bond yields higher and setting stocks up for another selloff on Monday.

“The market is like Wal-Mart’s (ad campaign): Watch out, prices are falling,� joked Len Hefter, Nasdaq trading chief at Jefferies & Co. in Dallas.

Declining stocks swamped advancers by about 6 to 1 on the New York Stock Exchange, where volume swelled to 390.5 million shares, up from 301.6 million on Tuesday.

“I think a lot of buyers are there, but they’re in no particular hurry,� Hefter said, because they know sellers face quarter-end and holiday-related pressures.

But the list of investment advisers telling clients to be cautious about stocks lengthened on Wednesday, raising concerns that this selloff could go on for much longer than the bulls expect.

Lehman Bros.’ influential market analyst Elaine Garzarelli, who won a wide following after predicting the 1987 stock market crash, lowered her composite stock indicator to 47% from 57.5%, a level she said is considered neutral for the market. A reading of 30% or under for her index is viewed as a sell signal.

“Investors are translating that negative talking into negative action and doing some selling,� said Marshall Acuff, investment strategist at Smith Barney Shearson, whose firm told clients to cut back stock positions on Tuesday.

Industrial, transportation and technology stocks continued to lead the market lower. Alcoa fell 2 7/8 to 71 3/4, Dupont lost 1 1/4 to 53 1/4, GE plunged 3 1/2 to 98 3/4, Federal Express dove 1 7/8 to 66 3/4 and Motorola was off 2 1/4 to 98 1/8.

But the selling also widened to include oil, drug and retail stocks.

While the bulls have argued that this decline will turn out to be nothing more than a classic 10% to 15% market correction, the severity of the selling--and the backdrop of rising interest rates and growing political problems in Washington--are boosting fears that a full-fledged bear market decline of 20% or more could be brewing.

With Wednesday’s selling, the Dow now is off 8.8% from its Jan. 31 peak. The Standard & Poor’s 500 index, off 6.93 points to 445.55 on Wednesday, now is down 7.6% from its all-time high.

And the Nasdaq composite of mostly smaller stocks, this week’s big loser, fell another 10.38 points to 744.91 Wednesday. It’s off 7.3% from its peak.

In the bond market, traders said selling was less intense than Tuesday’s session because many participants have already moved to the sidelines ahead of Friday’s potentially market-moving March employment report.

But, with many traders absent, the impact of each trade was magnified, making the market unusually volatile.

Mortgage-backed bonds took a dive. A report in the Wall Street Journal on Wednesday about a hedge-fund manager who had suffered deep losses in mortgage-backed securities unnerved the market, and left traders guessing about other hedge funds that might have to dump those bonds.

Market fears “are going to do away with the CMO (collateralized mortgage obligation) market in the short term,� said Bill Power, portfolio manager at PIMCO in Newport Beach.

In other markets:

* Wall Street’s weakness also sent stock prices tumbling overseas. Hong Kong’s Hang Seng index plunged 247.93 points to 9,232.21, while in Tokyo the Nikkei average fell 149.83 points to 19,559.91.

In London, the FTSE-100 index dropped 31 points to 3,092.4, and in Frankfurt the DAX index fell 20.82 points to 2,147.53. Mexico City’s Bolsa index ended down 47.21 points, or 1.9%, at 2,410.38.

* Gold inched up 10 cents to $386.10 on the Comex; silver fell 1.6 cents to $5.86.

* MAIN STORY: A1

Where Are Stocks Heading?

Will the stock market continue to drop, or is a rebound coming? Here are some key things to look for:

Bullish: What could make the market rebound

* The U.S. and world economies show continued moderate growth. This would push up demand for products and services, boosting corporate profits.

* Interest rates level off or fall back. Falling rates drove the bull market between 1990 and 1993. Many investors would settle for stable rates now.

* An easing of political tensions. Whitewater, the Mexican assassination, confrontations with North Korea have caused investors to worry more about the risks of owning stocks. Resolving these issues could calm investors.

* Inflation declines. Some key commodity prices have risen strongly in recent months, raising fears of shortages. A reversal of commodity prices could ease fears that the Federal Reserve will tighten credit further to fight inflation.

Bearish: What could drive stocks lower

* Interest rates rise further. Last week’s rate rise, to above 7% on the yield on 30-year Treasury bonds, was a significant psychological shock to investors. Higher long-term yields could inflame investor worries about the future.

* Individual investors rush to pull money out of stock and bond mutual funds. Inflows into mutual funds were a key boost during the bull market. Now, money has begun to trickle out of bond funds and foreign stock funds.

* Further selling by multibillion-dollar “hedge funds.� These global speculators have been trying to cut their losses on wrong-way bets made earlier this year that the dollar would continue rising and interest rates would continue falling.

* Stock indexes such as the Dow Jones industrials and Standard & Poor’s 500 continue to fall below major “technical� levels. For many analysts, key indexes’ fall below 200-day moving averages this week was a bad sign.

How the Biggest Stock Funds Fared

Percentage total loss for Wednesday, the first three days of this week and since Jan. 1 for the 10 stock funds with the greatest assets.

Wed. This week’s Year-to-date Fund change change change Janus Fund -0.74% -2.02% -2.58% Fidelity Asset Manager -0.75 -2.56 -5.10 Income Fund of America -0.79 -2.01 -4.05 Fidelity Puritan -0.89 -2.32 -0.29 Twentieth Century Ultra Investors -0.90 -4.88 -2.48 Investment Co. of America -1.00 -2.82 -3.86 Fidelity Magellan Fund -1.15 -4.46 -1.69 Washington Mutual Investors -1.47 -2.67 -4.93 Vanguard Windsor -1.51 -3.05 -1.58 Vanguard Index: 500 Port. -1.53 -3.26 -3.89

Source: Lipper Analytical Services, Inc.