Markets Turn Turbulent as U.S. Aids Saudi Arabia : Economics: Dow off slightly but could gyrate today. Oil prices ease, then rise. Gold is mixed, dollar higher.

World markets, jarred by the Iraqi invasion of Kuwait, steadied early Tuesday but turned turbulent later on expectations that the United States would mobilize troops for Saudi Arabia.

Stock prices, pounded ever lower since last Thursday, slowed their fall and, in some European markets, posted slight increases. In New York, the Dow Jones industrial average, which had lost 183 points in the previous three sessions, declined 5.70 points to 2,710.64 on heavy volume.

But some analysts forecast that the mobilization of American troops--first reported after the close of New York markets--was sure to bring violent new gyrations in today’s trading.

Iraq’s assault on Kuwait has pounded stocks and bonds on the expectations that it would bring sharply higher oil prices that would rekindle inflation and tip a fragile U.S. economy into recession.

Across markets, the picture was unstable:

U.S. bonds, hit hard Monday, recovered some losses but were pounded again toward the trading session’s close after the White House said Iraq was fortifying positions on the Kuwait-Saudi border. The benchmark 30-year Treasury bond lost $5.94 per $1,000 of face value. Its yield rose to 8.86% from 8.80% Monday.

Crude oil prices eased somewhat at the session’s beginning but rose again toward the close. In New York, crude oil futures for September delivery were up 26 cents a barrel, to $28.31.

Gold was mixed on world markets but eased in New York trading. Gold futures for August delivery fell 20 cents to $384.50 an ounce.

The dollar ended higher, on speculation during afternoon trading that a military clash in the Mideast would cause world investors to buy dollars as a safe haven. In late New York trading, the U.S. currency was quoted at 1.5875 German marks, up from 1.5788 late Monday, and at 150.90 yen, up from 150.35 the day before.

Stocks in Japan, which imports 70% of its oil from the Mideast, continued a sharp descent Tuesday. However, the Nikkei index of 225 shares closed at 28,509.14, up 856.07 points, or 3.10%, on the Tokyo Stock Exchange today. London’s FTSE 100-share index was up 0.7% Tuesday, as West German and French stocks regained about one-third of their Monday losses.

Many U.S. stock investors had expected Tuesday to bring a sharp rebound after the heavy selling of the last three days, and the Dow did open higher by about 35 points. But that rally didn’t last; and, for the rest of the day, most of the movement was downward.

“The conditions were all there for a good solid rebound, but the buyers had little conviction and few friends,” said Alfred Goldman, market strategist with the investment firm A. G. Edwards & Sons in St. Louis.

Trading volume on the New York Stock Exchange was 231.58 million shares, versus 240.40 million on Monday.

Among the broader market gauges, the Standard & Poor’s 500-stock index was up 0.40 to 334.83. One of the strongest major indicators was the NASDAQ composite index of over-the-counter stocks, up 2.04 to 402.08. Small stocks had been worst hit in the recent decline.

For the day, 740 shares gained on the New York Stock Exchange and 845 lost ground.

Investors described a day in which all eyes were focused on the news wires and the markets reacted instantly to any rumor from the Persian Gulf.

The original rise in prices was aided by reports that the Iraqis planned to release Westerners from Kuwait, which alleviated fears that Iraq planned to take hostages, in a replay of the 1979 Iranian crisis.

The Dow fell 28 points after a report that quoted BBC sources as saying Iraq was invading Saudi Arabia. When the BBC denied it had made such a report, stocks reversed ground.

Later, some traders began to buy on rumors that a plane landing in Jordan carried Westerners freed by the Iraqis. But it turned out the plane carried Japanese tourists and an Iraqi soccer team, said Marc Pado, technical analyst with Mesirow Capital Markets in Chicago.

Even with the prospect of U.S. military involvement, some analysts remained convinced that the market has overshot in its fall of 289 points on the Dow--nearly 10%--since July 17. “The longer-term picture is still not so bad,” Pado said.

But others insisted there is no way to guess how far down the bottom of the market will be because of high uncertainty over the future of oil prices.

The market’s volatility was again enough to trip the exchanges’ “circuit breaker” mechanisms, the rules imposed to call time-outs during unstable markets.

One circuit breaker was tripped when the Standard & Poor’s stock-index futures contract for September delivery, trading on the Chicago Mercantile Exchange, leaped five points to 339.40 in the first 10 minutes of trading.

The move brought a five-minute halt. The circuit breakers have been set off on each of the four days since the invasion.

While oil prices rose, oil stocks didn’t, and investors sold off stocks that are subject to the economy’s cycles, such as those of autos and retailing concerns.

Market highlights included:

Oil stocks were broadly lower in profit-taking, although most rebounded late in the session. Arco slipped 75 cents a share to $136.375 after trading as low as $134.875. Chevron dropped 75 cents to $78.625, Exxon lost 25 cents to $53.375 and Pennzoil fell $1.125 to $82.25.

Some food, drug and health-care stocks were winners as investors sought recession-resistant companies.

Defense stocks were mixed. Lockheed added 37.5 cents to close at $28.75, and Rockwell rose 50 cents to $25.50. But McDonnell Douglas fell $1.375 to $42.375 and United Technologies tumbled $2.75 to $51.875.

Some California banks and S&Ls; inched higher. Wells Fargo rose $1.50 to $61.875, Security Pacific added $1.25 to $30.125, Union Bank rose 50 cents to $20.25, Glenfed gained 50 cents to $10.375 and Coast Savings jumped 37.5 cents to $3.375.

Stocks finished higher in London, as the FTSE 100 index rose 15.6 points to 2,235.80. In Frankfurt, the DAX index rebounded 29.37 points, or 1.7%, to 1,770.30, reportedly boosted by a flood of orders from small investors.