Fears Aplenty Send the Dow Down 28.64 : Market Overview : <i> Highlights of Monday’s market activity, compiled from Times staff and wire reports: : </i>

* The stock market took another pounding in the wake of steep losses overseas and renewed worries about the world economy. The Dow Jones industrial average fell 28.64 points to 3,303.00, though it rallied near the close.

* The dollar rocketed after the Federal Reserve barreled into the market to stop the currency’s decline. The dollar advanced 2.4% versus the German mark.

Stocks

Stocks opened sharply lower and continued weak all morning. At its worst the Dow was off about 40 points, following Friday’s 29.99-point loss.

The catalyst for Friday’s decline had been IBM Corp.’s disappointing quarterly earnings report. But on Monday the U.S. market seemed shaken by heavy overseas losses.

In Tokyo, the Nikkei stock index plummeted 663.59 points Monday, or 4%, to close at 15,884.48. Elsewhere, Frankfurt’s DAX index tumbled 52.99 points, or 3.1%, to 1,649.67, while in London the Financial Times 100-share average lost 28.2 points to 2,403.7.

Analysts said U.S. and foreign investors’ new bearishness stems from Germany’s decision to raise interest rates last Thursday. The German central bank is seeking to cool inflation in that country, but investors worldwide fear the German action could hurt an already slowing global economy.

On the New York Stock Exchange, declining issues outnumbered advances by 11 to 6 on Monday, though volume was just 165.76 million shares, typically slow for a summer Monday.

Despite the gloom, analysts noted that U.S. stocks began to rally late in the day. Companies reporting favorable quarterly earnings helped improve sentiment.

Among the market highlights:

* IBM continued to sink for reporting earnings below analysts’ targets. The stock fell 2 1/8 to 92 7/8, after falling 5 1/4 on Friday.

Other tech losers included Digital Equipment, down 2 1/2 to 40 3/4; Computer Sciences, off 1 5/8 to 58 1/4; and Microsoft, down 1 to 69 1/4.

* Industrial stocks generally were weak. Bethlehem Steel lost 1 to 14, Alcoa fell 1 1/8 to 71 5/8, Deere sank 1 1/8 to 41 and GM lost 1/2 to 40 1/4. However, Cummins Engine rallied 2 1/2 to 68 1/4 and Eaton jumped 1 3/8 to 75 3/4. Both companies, in the truck parts business, reported strong quarterly profits.

* Financial stocks helped the market. BankAmerica jumped 2 7/8 to 44 3/8 after reporting surprisingly strong quarterly earnings. The report drew investors back to bank stocks, which were pummeled last week after leading the market in the first half of the year.

Other bank winners included Wells Fargo, up 1 1/2 to 73 1/4; First Interstate, up 1 1/8 to 41; Chemical Banking, up 1 to 36 7/8; and NationsBank, up 1 1/4 to 47 1/8.

* Some brokerage issues advanced. Merrill Lynch gained 1 1/4 to 51 1/4, Morgan Stanley added 1 1/8 to 53 1/8 and Legg Mason was up 3/8 to 19 3/4.

* Other stocks rising on favorable earnings reports included Premark (parent of Tupperware), up 2 to 35 1/4; carpet maker Shaw Industries, up 1 to 24 5/8; and machine-tool maker Acme Cleveland, which gained 3/8 to 6 1/4.

Currency

The dollar rode a roller-coaster, dipping close to historic lows against the German mark before a wave of central bank intervention prompted a major rally.

At the close in New York, the dollar bought 1.494 marks, up dramatically from 1.459 on Friday. Against the Japanese yen the dollar traded at 125.45, up from 124.45.

The dollar has been sliding for weeks, and last week’s interest-rate rise in Germany sparked a free fall in the currency. Higher rates abroad increase the attraction of foreign investments, thereby boosting their currencies versus the dollar.

On Monday, however, the Federal Reserve and other central banks decided enough was enough. The Fed began buying dollars on the open market when the currency hit 1.453 marks, a pfennig above its record low of 1.443 marks set Feb. 11, 1991.

Dealers said central banks of Germany, France, Italy, Canada, Sweden, England and Spain followed the Fed’s lead.

“It was an awful lot of central banks buying an awful lot of dollars to give it a bounce,” said Varick Martin, trader at Chemical Bank. “It was like an old fire horse smelling smoke.”

But many dealers expressed doubt that the central banks will be able to stop the dollar’s decline for more than a few days, given the wide spread between U.S. and foreign interest rates and renewed pessimism about the U.S. economy.

Credit

U.S. bond yields were flat to slightly lower ahead of Federal Reserve Chairman Alan Greenspan’s testimony before Congress.

The price of the Treasury’s 30-year bond rose 7/32 point, or $2.19 per $1,000. Its yield slipped to 7.66% from 7.68% Friday.

Traders said bond yields fell early in the day in part because some investors cashed out of stocks and bought bonds in search of a safer haven. “There was an early flight to quality,” said Elliot Platt, research director at Donaldson, Lufkin & Jenrette Securities Corp.

But as the U.S. stock market made up some of its early losses, bonds ran out of steam. By afternoon, the bond market turned quiet as traders resisted taking positions ahead of Greenspan’s testimony today and Wednesday. He will discuss the state of the economy.

The fed funds rate, the interest on overnight loans between banks, rose to 3.25% from 2.75% Friday.

In other news, Standard & Poor’s Corp. affirmed its “AA” rating on the city of Los Angeles’ general obligation bonds, but the rating agency said the outlook has been changed to “negative” from “stable” because of the region’s economic stress.

Commodities

Gold continued to rally on New York’s Comex, as some investors fearful of global economic turmoil sought haven in hard currency.

August gold futures rose $1.60 to $359.60 an ounce, following Friday’s rise of $4.90. Silver, however, didn’t follow gold; September futures eased 0.8 cent to $3.98.

Elsewhere, light, sweet crude oil for August erased an early loss to post a 21-cent gain on the New York Merc, closing at $21.79 a barrel.

Analysts said some of the strength in crude came on heightened tension in Iraq, arousing new speculation that U.N. forces may attack to force compliance with terms of a cease-fire that halted the Gulf War last year.