Long-term interest rates surged Thursday to their highest levels in eight months, fueling another selloff on beleaguered Wall Street.
The termination of the multibillion-dollar Tele-Communications Inc./Bell Atlantic Corp. merger also hurt the market, as investors dumped a host of stocks tied to the so-called information superhighway.
The Dow industrials ended with a loss of 51.78 points at 3,839.90. Losers swamped winners by more than 4 to 1 on the New York Stock Exchange on heavy volume of 343 million shares.
Analysts said the major catalyst for Thursday's decline was another sharp jump in interest rates, on the heels of strong economic news. The 30-year Treasury bond yield rocketed to 6.73% from 6.65% on Wednesday after the government reported that durable goods orders in January were above expectations.
Bond yields have been surging since the Federal Reserve Board officially boosted short-term interest rates slightly on Feb. 4, for the first time in five years.
The Fed's aim was to show it was serious about keeping economic growth moderate to restrain inflation. But instead of viewing the Fed's move in a positive light, many bond investors have bailed out, fearing that higher short-term interest rates will also push up long-term rates.
When the durable goods report was announced, it spawned fears that the Fed will tighten credit again soon, analysts said.
A tense political situation in Russia that sent European stock markets into a retreat also hurt U.S. stocks.
"It's the 'three strikes you're out' thing," said Bob Walberg, market analyst at MMS International, citing the bond market, the canceled Bell Atlantic/TCI merger, and the Russian concerns. "It applies to baseball and crime but also to the markets."
Bond investors' fears weren't helped by the Treasury's auction of $11 billion in new five-year notes Thursday. Despite decent demand, the average yield of 5.61% was the highest in more than a year.
"There's real concern here about the rise in interest rates. The fear now is that this rise in interest rates will reduce the flow of money into mutual funds. If it does, then the market has real problems," said Michael Metz, a vice president at Oppenheimer & Co.
Among the market highlights:
* Big losers in the Dow included AlliedSignal, down 1 3/8 to 77; GE, off 2 to 105 3/8; Chevron, down 1 3/8 to 87 1/4; Procter & Gamble, off 1 3/8 to 57, and DuPont, down 1 3/8 to 53 1/4.
* Many telecommunications stocks were slammed on disappointment over the Bell Atlantic/TCI merger's cancellation. Among cable TV issues, TCI sank 1 7/8 to 22 3/8, Comcast A fell 1 to 19 1/2 and Cablevision Systems dove 5 1/4 to 62 1/4.
But Bell Atlantic gained 1 3/4 to 54 1/2 because it no longer faces immediate earnings dilution from the merger. Other phone stocks also edged up, though many have been trounced in recent months. GTE gained 1 1/4 to 33 3/8, Southwestern Bell added 1 1/4 to 38 3/4 and BellSouth inched up 3/8 to 54 1/4.
* Interest-sensitive stocks hurt by the latest rate rise included insurer SunAmerica, down 1 1/8 to 36; builder Kaufman & Broad, off 1 1/8 to 20 3/4; Merrill Lynch, down 2 1/8 to 40 1/8, and Travelers, off 1 to 37 1/8.
* Circus Circus eased 5/8 to 36 7/8. After the market closed, the casino company reported record quarterly earnings and also said CEO William Bennett was stepping aside. President Clyde Turner will take his place.
* Among the day's few winners, Stac Electronics surged 2 1/8 to 6 1/2. On Wednesday, a federal jury awarded Stac $120 million from Microsoft for patent infringement.
Overseas, Russia's latest political troubles sparked deep losses in Europe. London's FTSE-100 index plunged 74.4 points to 3,267.5, and Frankfurt's DAX index skidded 37.38 points to 2,090.29.
In Tokyo, however, the Nikkei index rebounded 423.65 points to 19,765.48. And Mexico City's Bolsa index recouped early losses to close up 19.98 points at 2,592.33.
The dollar dropped sharply, hurt by Wall Street's decline, more signs of inflation and fresh indications that the Clinton Administration wants the U.S. currency to weaken against the yen.
In New York, the dollar ended at 104.85 Japanese yen, down from 105.55 on Wednesday. The U.S. currency also fell to 1.717 German marks from 1.729.
In other markets, gold ended lower on the New York Comex, easing $1.20 an ounce to $376.50. Silver fetched $5.17, off 5.7 cents.
Crude oil futures prices posted their strongest one-day gain in nearly a month. Market Roundup, D8
* ROBUST ECONOMY: Orders to U.S. factories for durable goods jumped a surprising 3.7% in January. D2