* Stocks declined broadly for a second day, weighed down by profit taking and increasing doubt about the chance of further credit easing by the Federal Reserve.
The Dow Jones industrials fell 27.06 points to 3,241.50, on top of Wednesday's 21.69-point drop.
* Fewer unemployment claims and a jump in retail sales pushed bond yields up again. The 30-year Treasury bond yield rose to 7.96% from 7.91% Wednesday.
Thursday's selloff showed an increasingly weak market, analysts said: Declining issues outnumbered advances by nearly 3 to 1 on the New York Stock Exchange, though volume was flat at 208.94 million shares.
NASDAQ's composite index of smaller stocks sank 8.32 points, or 1.3%, to 621.97. The Dow lost 0.8%.
The Standard & Poor's 500 index traded at a new 1992 low of 405.42, though it rallied near the close to finish at 406.51, down 2.82 points.
Though stocks have been helped recently by signs of economic recovery, those same signs are sending interest rates higher. Investors are torn between the desire to buy stocks for a recovery and the fear of what rising interest rates might do to stock values.
Thursday, the government said claims for jobless benefits fell to 437,000 for the week ended Feb. 22, a bigger drop than expected.
Today's report on February employment may be key for both stocks and bonds, analysts say: If the bond market senses that the economy is recovering too quickly, yields could spike, causing much more profit taking in stocks.
Economists expect today's report to show an increase of 16,000 non-farm jobs last month, compared to a 91,000-job drop in January. The unemployment rate is forecast to be unchanged at 7.1%.
A recovery ultimately would be good for stocks, but many investors who've amassed huge paper profits in the market may decide to trim their holdings now, and buy again when interest rates stabilize.
"The feeling is that if the Dow is going to rise through 3,300, there will be time to catch it on the way up," said analyst Jim Schroder at MMS International.
Among market highlights:
* Investors continued to dump many of last year's favorite growth stocks. Because many of these issues sell for high prices relative to earnings, they are most vulnerable when rising interest rates cut stocks' perceived value.
Losers included United Health, down 4 1/8 to 74 7/8; U.S. Surgical, off 2 5/8 to 105 5/8; Amgen, down 1 7/8 to 62 3/8; U.S. Healthcare, which fell 1 3/4 to 46 1/2, and Federal Home Loan Mortgage, off 3 3/4 to 112 3/4.
* Technology stocks, among the strongest issues in recent months, were slammed. Cadence Design sank 2 to 22 1/2, Quarterdeck lost 1 3/8 to 19 3/8, Cabletron Systems dropped 1 3/4 to 57 1/4, and Digital Equipment fell 2 1/8 to 57 7/8.
* Some industrial stocks that had run up recently were hit by profit taking. Machinery maker Varity sank 5/8 to 12 7/8, truck maker PACCAR dropped 1 3/4 to 56, and Inland Steel gave up 7/8 to 21 7/8.
However, many industrial issues continued to inch higher. They would benefit first from an economic recovery. Snap-On Tools gained 1/2 to 38 5/8, Cummins rose 3/8 to 62, and GE inched up 1/8 to 77 3/4.
* Retail stocks were mixed after the companies reported February sales. The Gap fell 2 3/8 to 46 on disappointment over a 7% increase in the clothier's same-store sales for February. Other losers included Value Merchants, down 2 7/8 to 26 3/8; May Department Stores, down 2 3/8 to 60 1/2; Dayton Hudson, off 1 1/4 to 65 3/4, and Woolworth, off 3/4 to 29 1/8.
Winners included Wal-Mart, up 1 1/4 to 53 1/4; Penney, up 7/8 to 62 7/8, and Circuit City, up 5/8 to 32 3/8.
* Telefonos de Mexico slipped 3/8 to 55 7/8, stabilizing after Wednesday's steep fall, which came on news that the Mexican government will issue more stock in the phone giant. Mexico Fund, on the NYSE, lost more ground, off 1 1/8 to 30 1/2.
* Pilgrim Regional Bank fund eased 3/8 to 10 1/8. The fund said it will pay out less in dividends.
* Two Southland companies went public Thursday: San Diego-based Foodmaker, owner of Jack in the Box restaurants, issued stock at 15 on the NYSE. The shares closed at 15 3/8. The stock symbol is FM.
Also, Dames & Moore, an L.A.-based engineering firm, issued stock at 20 apiece. The shares closed at 21 3/4 on NASDAQ. The stock symbol is DMOR.
In foreign markets, London stocks weakened, with the Financial Times 100-share average off 20.10 points to 2,538.3 points. Speculative demand for Daimler-Benz helped push Frankfurt's DAX average up 5.75 points to 1,764.80.
In Tokyo, the Nikkei average ended below 21,000 for the first time in eight days, slipping 241.00 to 20,864.42.
In Toronto, Canadian stocks dived on rumors of financial trouble at developer Olympia & York. The TSE-300 index dropped 42.1 points to 3,545.60.
As bond yields rose again, the price of the Treasury's 30-year bond lost 19/32 point, or $5.94 for every $1,000.
Yields rose across the board, even on short-term issues: The discount rate on three-month T-bills rose to 4.05% from 4.02%.