FINANCIAL MARKETS : Stocks Drop as Traders Await Jobless Report

Continued fears that the Federal Reserve Board will raise short-term interest rates soon pushed stocks lower for the fourth consecutive session Thursday.

The Dow Jones industrial average fell 11.78 points to 3,775.56, its third loss in four days. The blue-chip gauge was down as much as 19 points near the close, but a flurry of last-minute buying erased some of the losses. Broader indicators of stock prices also dropped for the fourth straight day.

Many investors were sidelined ahead of today’s release of payroll and unemployment data. Analysts expect government reports to show that non-farm payrolls increased by about 250,000 in September and that the nation’s unemployment rate stayed steady at 6.1%.

A larger payroll number or big drop in unemployment could send a signal to the Fed that the economy is growing too fast, offering more incentive to the central bank to increase short-term interest rates for the sixth time this year, analysts said.

The Dow sank nearly 60 points on Tuesday and Wednesday combined, after reports of an optimistic purchasing managers survey, strong retail and auto sales and robust factory orders stirred fears of inflation.

As jittery as investors are, Thursday’s selloff showed little conviction. New York Stock Exchange volume was a light 271.43 million shares, down from 360.33 million on Wednesday. Declining issues claimed a slim lead on advancers on the New York Stock Exchange, with 990 up, 1,128 down and 713 unchanged.

The bond market marched in place most of Thursday, fearing the impact of today’s employment statistics on inflation. Stocks did not get much help from the bond market, where the Treasury’s 30-year bond yield rose 0.02 point to 7.96%. Its price, which declines when the yield rises, fell 5/32, or $1.56 per $1,000 invested.

Neither market reacted much to a government report that first-time claims for state unemployment benefits rose 7,000 last week, the first increase in five weeks and slightly above the 5,000 increase analysts expected.

At the same time, the dollar rose slightly against most key currencies in extremely quiet trading Thursday, as dealers waited for release of the employment data.

Among the market highlights:

* Retail issues were mixed following the release of September chain store sales figures. Kmart fell 1/2 to 16 3/4. The company said September sales at stores open at least a year rose 2.8%.

* TJX fell 2 3/8 to 17 7/8. The retailer said September sales at stores open at least a year declined 4% and were “very disappointing.”

* Santa Fe Pacific led the most actives on the NYSE and rose 7/8 to 13 1/2. Union Pacific offered $3.4 billion for the railroad after the close of trading Wednesday, in a bid to head off Burlington Northern’s acquisition of the company.

* Union Pacific fell 1 7/8 to 50. Burlington Northern closed down 1/2 at 48 7/8.

* Quaker Oats fell 1 to 74 1/4. Smith Barney said it lowered its 1995 and 1996 fiscal year estimates on the firm, citing softness in the European pet food market and higher spending on Gatorade.

* Shares of auto makers were weak, with General Motors falling 1 5/8 to 44, Chrysler off 7/8 to 44 1/4 and Ford down 3/8 to 27 1/4.

Overseas stock markets were mixed. Tokyo’s Nikkei average slid 96.32 points to 19.655.23, while Frankfurt’s DAX average closed at 1,955.69, down 13.03 points. But London stocks closed higher, with the Financial Times 100-share average rising 28.1 points to 2,984.4.

Mexico’s Bolsa index sank 28.63 points to close at 2,641.39.