February 3, 1995

Battered by rising interest rates, a steep drop in client activity and charges for accounting mistakes, Salomon Inc. said yesterday that it lost $122 million in the fourth quarter, a performance that capped its first unprofitable year since 1981, when the firm went public. For the latest quarter, the securities and commodities firm, the parent of Salomon Brothers Inc., reported a loss of $1.32 a share, in contrast to its record earnings of $476 million, or $4.33 a share, a year earlier.

For almost two years, Pedro Fernando Chunza-Plazas has sat in a Federal prison cell in Lewisburg, Pa., accused by the United States Government of being a major drug trafficker and serving two concurrent five-year sentences. But Mr. Chunza-Plazas was convicted only of carrying forged immigration cards, an offense that usually carries a sentence of no more than six months.

President Clinton will propose $1.6 trillion of spending in his 1996 budget, and he would more than offset the cost of a middle-class tax cut with savings in other areas of the budget. But he still falls far short of Republican demands for a balanced budget in the year 2002. Mr. Clinton's budget request, to be submitted to Congress on Monday, shows a deficit of $196.7 billion for the 1996 fiscal year, up slightly from the $192.5 billion that he projects for this year. Although his Budget Message boasts that his economic policies have sharply reduced the deficit from record levels, he says the deficit will probably stay in the range of $190 billion through 2005.

The leaders of Egypt, Jordan, the Palestine Liberation Organization and Israel, in their first regional summit meeting, agreed tonight to conduct talks in the coming days aimed at overcoming the obstacles to peace in the region. In the past, Prime Minister Yitzhak Rabin has met individually with President Hosni Mubarak of Egypt, King Hussein of Jordan and Yasir Arafat, chairman of the P.L.O., but until Mr. Mubarak invited the group to Egypt, Mr. Rabin had never sat down with all three of the Arab leaders who have formally made peace with Israel.

Christmas arrived in January for many retail chains, as sales exceeded merchants' expectations. Shoppers turned out in force last month to snap up the bargains offered in the aftermath of the disappointing 1994 holiday sales season, when most retailers failed to post the sales gains they had anticipated.