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STOCKS PLUNGE IN LATE TRADING

Stocks turned sharply lower late this afternoon as growing worries about company profits overshadowed any optimism generated by a tame inflation reading.

The Dow Jones Industrial Average, down 99.21 at 7,958.77 at 3 p.m., surrendered an early 55-point gain as Merck and Sears Roebuck slid following their latest earnings reports.

Broader stock measures also turned lower despite a strong bond market, where interest rates fell after this morning's report that retail inflation remained subdued in September despite another sharp increase in energy costs.

For the most part, today's third-quarter reports by Coca-Cola, Sears and Compaq Computer seemed to reinforce the trend toward strong results for the July-September period.

Coca-Cola was up 7/1 6 at 60 1/4 to help boost the Dow, but Sears, which also warned that consumer credit delinquencies will likely hurt its holiday results, was off 4 5/8 at 49 1/4 , and Merck was down 4 1 1/1 6 at 97 9/1 6 after reporting a third-quarter profit slightly below analyst forecasts. Combined, Sears and Merck were down the equivalent of 35 Dow points.

Compaq, meanwhile, was down 3 1/4 at 74, also on the New York Stock Exchange, after rallying on Wednesday in advance of its report.

Declining issues outnumbered advancers on the New York Stock Exchange, where volume came to 470.61 million shares, up from 403.01 million at the same point on Wednesday.

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