ECONOMY

New construction rose 6 percent in May from the April level with the help of three waterway projects valued at $300 million, but the year to date is still 10 percent behind the 1989 pace, according to F.W. Dodge, a construction-data service.

Treasury yields fell. The average yield on four-year notes was 8.50 percent, down from 8.589 percent at the last auction on March 28 and the lowest level since December. The notes will carry a coupon interest rate of 8.5 percent with each $10,000 in face value selling for $10,000. COMPANIES

AT&T said its profit in the second quarter is likely to be lower than last year's in part because sales have fallen short of expectations. But the company said it stands by its earlier projection that net income for all of 1990 would rise to a record level.

Harman International, a Washington-based maker of stereo and high-fidelity equipment, said it is experiencing a "relatively soft fourth quarter" and anticipates that earnings for the year ending June 30 will be 5 percent to 7 percent below last year's level.

Timken Co. said it will begin construction next month on a $23 million bearing plant in Altavista, Va., as part of a $1 billion capital investment program. Altavista in 20 miles south of Lynchburg.

Merrill Lynch Capital Partners, an affiliate of Merrill Lynch, has become the majority shareholder of Londontown Holdings, the parent of Londontown Corp. of Eldersburg, Md., which makes rainwear and outerwear under the London Fog label.

Mobil Chemical agreed to pay $15,000 to settle a suit filed by the state of Texas challenging claims that Hefty trash bags are degradable. Texas is one of seven states suing the company over the claims, which Mobil has dropped from its advertising.

Circuit City Stores, citing fears it may not be able to provide orderly credit services for 800,000 credit card holders in switching to its own credit card, is suing Barclays Bank of Delaware, which has run its credit card program. The suit demands that Barclays give Circuit City a list of card holders and their payments histories on computer tape.

New Venture Gear, the joint manufacturing effort between GM and Chrysler, signed a four-year deal to supply five-speed transaxles for cars made by Britain's Rover Group.

UPI said members of the union representing editorial employees of the company have approved a 2 1/2-year contract. A company spokesman declined to disclose the vote or specifics of the pact with the Wire Service Guild.

Bolar Pharmaceutical was sued by SmithKline Beecham shareholders, who allege that Bolar submitted false or misleading data to the FDA in gaining approval to market the generic version of SmithKline's anti-hypertension drug Dyazide.

Cineplex Odeon said its major shareholders, MCA and Claridge Investments, have agreed to the final terms of a deal to provide the Canadian movie theater company with up to $100 million in backup financing. REGULATION

A financial fraud bill was introduced by Rep. Lynn Martin (R-Ill.). The bill would imposed a two-year mandatory jail term and hefty fines on those found guilty of violating federal financial institutions laws.

The House Banking Committee defeated a bid by Rep. Joe Kennedy (D-Mass.) to require the Treasury to provide periodic reports to Congress monitoring progress under debt restructuring agreements with other countries that involve help from the World Bank or IMF.

Grand Union said the FTC approved the sale of 13 food stores to the Price Chopper operating company. The approval was required after the acquisition of Grand Union by an investment group that includes the owners of P&C Food Markets.

MNC Financial received federal approval to merge Equitable Bank of Baltimore into Maryland National Bank. MNC said the merger will take place June 30. CONTRACTS

QuesTech of Falls Church received a $1.1 million Army contract for nine months of engineering and technical support for electronic warfare systems. The work will be done in the Washington area, the firm said. PEOPLE

Rep. Dan Rostenkowski, chairman of the House Ways and Means Committee, is scheduled to introduce a bill today that would create enterprise zones with tax incentives to promote development in economically distressed areas, tax staff aides said. Such a move would be a reversal of the Illinois Democrat's longstanding opposition to enterprise zones.

Donald Dixon, the former owner of Vernon Savings & Loan accused of illegally trying to raise money for former House speaker Jim Wright and others, pleaded innocent to 38 federal charges related to the collapse of the Dallas thrift three years ago. ODD LOTS

Gulfstream Aerospace and its Soviet partner, the Sukhoi Design Bureau, said a prototype of the world's first supersonic business jet could be in the air by 1993, with production starting three to four years later.