DOW TAKES WORST TUMBLE SINCE '91; STOCK INDEX DROPS 247 POINTS.

Byline: David Barboza The New York Times

The stock market plummeted Friday, with the Dow Jones industrial average suffering its worst one-day sell-off in nearly six years.

The collapse left the stock market wobbly and investors uncertain, capping a nasty weeklong decline in prices that began just after the Dow reached its most recent peak.

On Friday, the Dow plunged 247.37 points, or 3.1 percent, to 7,694.66, its worst setback in percentage terms since Nov. 15, 1991. In the past seven sessions, the Dow has lost almost 565 points, or 6.8 percent, bringing down with it some favorite stocks of investors, including General Electric, Disney, IBM, Intel, Microsoft and Procter & Gamble.

Still, few on Wall Street seemed deeply troubled, even though the plunge came during a week in which the stock market was treated to some healthy news on the economy and inflation. Nonetheless, they had a hard time explaining the sell-off.

While steep, this downturn so far is still less than the slump of March and April, when the Dow - which is the most widely followed stock index - fell 9.8 percent on fears of rising interest rates and the threat of an overheated economy. Even with the recent decline, the Dow is up 19.3 percent for the year.

Many analysts insisted Friday that stocks were simply due for a pause after the rally that had taken the Dow up 29 percent since spring, to its Aug. 6 high. At that point, the Dow for the year already had beaten its performance for all of 1996.

``A lot of this may be a pause after a fabulous year,'' said Eric Miller, chief investment officer at Donaldson, Lufkin & Jenrette. ``Some investors are now just trying to reassess.''

One reason analysts are still sanguine is that the cause of this bout of investor uncertainty is not a raft of bad news. Instead, there has been a series of indications that the perfect news of the year so far - low inflation, moderate growth and surprisingly healthy corporate earnings - may just not be as perfect the rest of the year.

``Just a short two weeks ago, every bit of economic data was viewed as bullish, and now people are starting to question everything,'' said Thomas Galvin, chief equity strategist at Deutsche Morgan Grenfell.

One new distress signal is that the surprisingly strong performance of earnings this year may begin to slow. For instance, Gillette warned Friday that its earnings would be disappointing in the months ahead. On the previous Friday, a similar warning from Coca-Cola Co. helped drag down stock prices.

Besides earnings worries, there were concerns early in the day about rising interest rates in the bond market and a falling dollar, analysts said. They added that Friday's losses might have been accelerated by especially heavy computer-guided trading.

Others said that the strike by employees of United Parcel Service also might be worrying investors, who fear that stepped-up demands from labor could hurt corporate profits and create inflationary pressure.

``This isn't just spontaneous combustion, there's a match lit,'' said Byron Wien, the U.S. investment strategist at Morgan Stanley & Co., citing the warning from Gillette and the UPS strike.

``Basically, the market is overvalued anyway,'' he added, contending that stocks have become too expensive. ``And so when a couple of matters like this go wrong, the market adjusts downward.''

Some analysts said the main reason for the stock plunge was the recent climb in interest rates, although rates wound up a little lower Friday, with the yield on the 30-year bond falling to 6.54 percent from 6.55 percent Thursday. Higher interest rates can make bonds more attractive than stocks, especially when stocks are already very expensive.

The yield on the 30-year Treasury bond had fallen to 6.29 percent July 31, but it has since surged on signs that the economy may be picking up enough speed in the second half of the year possibly to force the Federal Reserve to raise short-term interest rates.

But as with the stock market, the outlook for the bond market is still relatively positive because inflation remains quite low and the pickup in growth does not appear to be excessive. Such factors as these make it hard for analysts to explain the recent downturns in both markets.

In Friday's trading, which was relatively brisk for a late summer session, the broader stock market also went into a swoon. The Standard & Poor's index of 500 stocks sank 23.96 points, or 2.6 percent, to close at 900.81. And the technology-heavy Nasdaq composite index fell 24.66 points, or 1.6 percent, to 1,562.03.

Indeed, few stocks were spared. On the New York Stock Exchange, nearly three stocks fell for every one that rose. And across the major exchanges, nearly $220 billion in market value was lost in a single session.

The dollar's decline against the Japanese yen, the German mark and other European currencies in the past week also has raised concerns among traders and investors. A fall in the dollar makes the stocks and bonds held by foreigners less valuable and could force them to sell U.S. securities quickly.

But Donald Selkin, an analyst at Prudential Securities, argued that it was not the dollar's decline nor rising interest rates that was troubling investors. He said the problem was simply a loss of momentum or enthusiasm among investors, and a fear that the economy might accelerate and become inflationary.

``This just goes along with the general trend lately; the market just wants to go down,'' he said. ``And there is just a latent belief that the economy is getting too strong.'' While a growing economy can be good for corporate earnings, investors fear too much growth because it could bring higher interest rates.

In spite of such concerns, though, many on Wall Street say that nothing fundamental has changed. ``We haven't seen a change in the economic reality,'' said Marshall Acuff, a market analyst at Smith Barney. ``This is just a shift in confidence and sentiment.''

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Chart: DOW DECLINE

Associated Press