BIZWATCH\MARKETS.

BANK STOCKS FALL: Banking and financial services stocks fell as interest rates moved higher. Merrill Lynch fell 1-3/8 to 55-7/8. The Federal National Mortgage Association, or Fannie Mae, fell 1-1/4 to 32-1/2. Basic materials stocks, which are closely tied to the economy, also fell, including paper and chemicals. Georgia Pacific slid -7/8 to 71-7/8. DuPont dropped 1-7/8 to 76-3/4.

MATTEL ENDS MERGER BID: Barbie's courtship of G.I. Joe is over. On Friday, El Segundo-based Mattel Inc. pulled the plug on its $5.2 billion merger proposal to rival Hasbro Inc. of Pawtucket, R.I., after a dogged pursuit that began last year. In a letter made public by Mattel Chairman John W. Amerman, the maker of Barbie blamed Hasbro's political maneuvering for the deal's demise. Hasbro shares fell 6-1/8 Friday, closing at 34-5/8. Mattel rose 1-1/8 to 33-5/8. Last week, Mattel disclosed that its stock-for-stock merger proposal had been turned down by Hasbro. The maker of G.I. Joe said a merger between the world's top two toy makers would have a hard time getting federal approval because of antitrust concerns.

HEALTH CARE PROPOSAL: Baxter International Inc. offered $3.8 billion for W.R. Grace & Co.'s National Medical Care unit, a leading operator of kidney dialysis centers that has been under investigation for fraud. Baxter said Friday that public disclosure of the offer was designed to focus shareholder pressure on Grace management, which thus far has been cool to Baxter efforts to acquire National Medical Care. National Medical Care has been under federal investigation concerning quality control and its Medicare billing practices.

RETAILER SHUTTING DOWN: Merry-Go-Round Enterprises Inc., the apparel retailer that has been battling bankruptcy since January 1994, said it was going out of business and would liquidate its assets and lay off workers immediately. Company officials said Friday that they had been unable to obtain financing to continue and that Merry-Go-Round did not have the support of the manufacturers who supply its 536 stores with men's and women's clothes.

DAIWA ENDS U.S. OPERATIONS: Japan's Daiwa Bank Ltd. closed an ill-fated chapter in its overseas business, formally shutting its U.S. operations in compliance with a government-ordered eviction from the United States. The bank completed the sale of branches in 15 U.S. cities and most of its loans and related assets to Sumitomo Bank Ltd. for $3.37 billion.

HMO TRIES FOR IMAGE BOOST: A leading HMO is trying to quell charges that it gags doctors from talking to their patients about expensive treatment options or financial bonuses the doctors get to restrict care. U.S. Healthcare, a health maintenance organization with more than 2.2 million members, said Friday that it is inserting a "freedom of speech" clause in its contracts with physicians. The HMO was responding to a growing uproar from doctors and many state legislators who accuse the managed care industry of unethically interfering in the doctor-patient relationship in the name of higher profits.

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Photo; (color) no caption (Daiwa Bank branch) Chart (1) BIZFACTS (Not) taxing rich Americans (2) Dow Industrials