FINANCIAL MARKETS : Your Money : Dow Rises 13, but Dollar Tumbles

Stocks finished mixed Tuesday, while bond yields edged up and the dollar slid sharply against key currencies.

A late burst of buying pushed the Dow industrials up 13.39 points to 3,714.41, the third gain in a row. The Dow was helped by another rally in shares of Eastman Kodak, which rose 1 3/8 to 46 1/8 on news that it will sell its drug division.

In the broad market, losers edged winners by about 9 to 8 on the New York Stock Exchange. Still, some key indexes moved higher with the Dow, including the Russell 2,000 index of smaller stocks. It rose 0.46 point to 254.50.

Some analysts expressed surprise at the stock market’s continuing resilience despite rising interest rates and a weak dollar.

Since Friday, the stock market has overcome a renewed surge in bond yields, as bond traders focus on the potential for higher inflation in a growing economy.

On Tuesday interest rates moved up again, though long-term yields closed only slightly higher. The 30-year Treasury bond yield rose to 7.34% from Monday’s 7.33%.

Shorter-term yields, however, were up sharply for a second day in a row. The yield on three-month T-bills closed at 4.14%, compared to Monday’s 4.10%.

Analysts say the bond market’s woes Tuesday were sparked by news that the government’s leading economic indicators rose 0.7% in March, the highest figure since the government began keeping the index in 1948. Economic strength is boosting the odds of higher inflation and of another credit-tightening move by the Federal Reserve Board.

Also weighing on bonds was another steep drop in the dollar, which could add to pressure on the Fed to raise short-term interest rates further. Higher rates could help defend the dollar.

In New York, the dollar sank to a six-month low of 1.637 German marks, from 1.649 on Monday. It also fell to 101.05 Japanese yen from 101.65.

Much of dollar’s decline in New York occurred late in the day after it became evident that the Fed would not intervene in the foreign exchange markets. The Fed intervened heavily on Friday, buying dollars and selling marks and yen to support the U.S. currency.

But on Tuesday, speculators attempted to test the Fed’s tolerance.

“This is one of those instances where there might be rewards for taking on the Fed,” said John Rothfield, economist at First National Bank of Chicago. He and other analysts noted that supporting the dollar could become a costly exercise for the Fed.

Economists say the dollar’s weakness may be due to global investors’ perception that the U.S. economy is threatened by higher inflation as growth picks up.

In the stock market, meanwhile, trading was dominated by news of more consolidation in the health care sector and by rumors of a takeover bid for Time Warner Inc.

Among the market highlights:

* Time Warner leaped 3 7/8 to 40 in heavy trading on fresh rumors that Seagram is preparing a hostile bid for the media giant.

To make such a bid, speculators suggested that Seagram could enlist the help of 24%-owned DuPont Co., which announced last week set plans to raise $3 billion in a debt offering. None of the companies would comment on the rumors.

* In the health care field, United Healthcare jumped 2 3/8 to 46 1/2 on news that it will sell its drug-management unit to SmithKline Beecham. And Value Health rocketed 3 1/4 to 44 1/4 on news of a joint venture with Pfizer.

Overseas stocks were generally weaker. London’s FTSE-100 index fell 25.3 points to 3,100.0, and Frankfurt’s DAX index lost 16.36 points to 2,252.29. The Tokyo market was closed for a holiday.

In Mexico City, the Bolsa index added 8.50 points to 2,239.23.

Market Roundup, D6