NEW YORK -- At Tandy Corp., owner of the big chain of Radio Shack electronics stores, profits slumped at the end of last year because customers queasy about the economy balked at buying radio-controlled cars and other high-priced gadgetry for their kids.

At Caterpillar Inc., earnings plunged because the construction companies that buy its bulldozers and mechanical shovels were suffering from a severe business slowdown.

The reasons vary from company to company, but for most of corporate America the bottom line for the final quarter of 1990 was the same: disappointing. Except for a few special cases -- notably the oil and computer industries -- the general business downturn has reduced companies' sales volumes, and earnings margins have shrunk because of rising costs and pressures to keep prices down.

The poor fourth-quarter results mean that profits for the whole of 1990 dropped by 3 percent to 4 percent, the second year in a row in which earnings have declined, according to Wall Street economists.

If predictions prove correct that 1991 will be more of the same, it will mark the first time since the 1950s that profits dropped for three straight years.

"In a nutshell, profits are no good," said Donald H. Straszheim, chief economist at Merrill Lynch & Co., the nation's largest brokerage company. "Business is weak. Companies aren't finding demand strong enough to pass through the various costs that they are incurring. As a result, it's coming out of their hide."

Oddly enough, the profit figures that U.S. companies have reported thus far for the fourth quarter of 1990 suggest -- on the surface -- that there has been a modest improvement in earnings compared with the fourth quarter of 1989.

Based on reports from 70 percent of the 500 companies listed in the Standard & Poor's 500 index, profits in the fourth quarter actually were up by 5.8 percent from a year earlier, according to data compiled by Bridge Information Systems Inc. of St. Louis.

But the numbers are deceiving. They are distorted by unusually high profits at most of the big oil companies and by the fact that they are being compared with the final period of 1989, when hordes of companies took steep one-time charges against earnings.

"The only reason the numbers are looking positive is that the write-offs a year ago were extremely high," said Susan C. Lakatos, vice president for investment strategy at Kidder, Peabody & Co. here.

The numbers could look even grimmer when the auto companies and retailers, two sectors particularly hard hit, report their fourth-quarter results in the weeks ahead.

The principal reason for the weak profits being reported is the overall economic slowdown, especially in the U.S. domestic market.

When orders for new business slow, companies are often unable to trim payrolls or reduce fixed costs quickly enough to maintain profit margins.

"The most important thing for profit growth is the level of economic activity. Obviously, there was a dramatic deceleration in economic activity in 1990, with by far the most significant difference in the fourth quarter," said Abby Joseph Cohen, who is one of two heads of investment policy at Goldman, Sachs & Co. here.

The downturn in the fourth quarter occurred so quickly that many companies were caught unprepared, with the result that the trend has been for companies to report earnings that were worse than Wall Street professionals were expecting.

Although computer companies surprised analysts by posting better results than anticipated, profits were disappointing at the big regional telephone companies, electric and gas utilities, paper manufacturers and airlines.

The businesses of Tandy and Caterpillar are as diverse as they are dismal. But they offer a window into the economy and to the factors driving it down. Tandy, which owns 4,800 Radio Shack stores nationwide, said it suffered from both a slowdown in overall sales growth and consumer resistance to its highest priced, most profitable products. The result: Tandy's revenue in the September-to-December period increased by an anemic 3 percent from a year earlier, to $1.5 billion, and profits dropped 14 percent to $101 million.

Tandy's problems illustrate the difficulties in the retail industry, which had weak sales during the Christmas season.

"Just as you got closer and closer to Christmas, you had this continued escalation in news about the increasing likelihood of war. That had to play very, very heavily on consumers' minds as they were going through the stores," said Philip M. Bradtmiller, director of investor relations for the Fort Worth, Tex.-based company.

One result was that consumers bought fewer of Tandy's top-of-the-line personal computers, items on which its profits are the highest. The company also was disappointed by slack sales of electronic games and toys.

"When you're in a recessionary environment, a lot of discretionary Christmas spending is reoriented toward more practical goods. Maybe the kids got something to wear," Bradtmiller said.

In a more traditional, "smokestack" industry, Caterpillar in the fourth quarter posted a huge 90 percent drop in profits to $11 million, down from $107 million a year earlier, as sales of vehicles and machinery dropped sharply to the slumping construction and mining industries. Total revenue fell $5 million from a year earlier to $2.76 billion.

The combination of stagnant revenue and intense competition from commercial rivals -- such as Japan's Komatsu -- meant that Caterpillar was unable to raise prices enough to cover its cost increases.

"The principal reasons for the decline in profit were effects of inflation on costs and lower physical sales volume," the company said in a prepared statement.

In an experience common to many U.S. firms, Caterpillar also found that business was worse in the U.S. domestic market than abroad. Product sales at home dropped 10 percent, whereas sales abroad climbed 5 percent.

That distinction may become less of a factor in 1991, however, as an economic slowdown already underway in the United States was expected to take hold more strongly in Western Europe and Asia.