US stocks dropped yesterday as investors worried about the latest Iraq crisis and 3M joined the list of blue chip companies warning of lower fourth- quarter earnings.

The Dow Jones industrial average dropped 32.70 points to 8790.60.

Further hurting stocks was a Federal Reserve report showing that production at the nation's factories declined in November for the fourth time in six months, reflecting last month's unseasonable warmth and the economic slump that began in Asia last year.

The Standard and Poor's 500 was down 0.85 at 1,161.98 , and the technology-heavy Nasdaq composite index dropped 3.24 to 2,009.36. Declining issues outnumbered advancers by a narrow margin on the New York Stock Exchange.