FINANCIAL MARKETS : Report of Retail Slowdown Dampens Yields; Dow Up 4.04

Treasury bond yields finished sharply lower Tuesday after weaker-than-expected figures on January retail sales renewed a feeling that the economy is starting to lose some of its vigor.

Stocks finished mixed, though the Standard & Poor’s 500 index hit a record high.

Bond prices staged an across-the-board rally after the Commerce Department reported that retail sales rose 0.2% in January--less than the 0.3% rise analysts had predicted.

The 30-year Treasury bond yield tumbled to a five-month low of 7.59% from Monday’s 7.66%%, and shorter-term yields also were broadly lower.

The unexpectedly weak retail sales stirred bond investors’ hopes that the economy might finally be slowing in response to seven interest-rate increases by the Federal Reserve over the past year.

“You have evidence that the economy is starting to turn over. Those are the things that the bond market likes to see,” said Bob Brusca, chief economist with Nikko Securities International.

A slower pace of growth would be welcomed by bond investors--and in theory, by stock investors--because it could allow for lower interest rates and a sustained low rate of inflation.

On Wall Street, the stock market seemed to have mixed feelings Tuesday about the economic trend. The S&P; 500 index rose 0.90 point to 482.55, surpassing its previous record of 482.00 set on Feb. 2, 1994.

Also, the Dow industrial average ended up 4.04 points at 3,958.25.

But declining stocks narrowly outnumbered advancing ones on the New York Stock Exchange, and Big Board volume came to 301 million shares, up from 255 million Monday but still not wildly active.

Some traders may be waiting for more evidence of a moderately growing economy. Today, the government will report on consumer inflation and factory utilization in January.

Meanwhile, the dollar slumped Tuesday to a two-week low against the German mark as technical selling and concerns about the stability of Mexico offset the positive effects of a rally in the U.S. bond market.

In New York, the dollar was quoted at 1.509 marks, down from 1.522 Monday.

The greenback ended only slightly lower against the Japanese yen. Selling of yen for marks and reports of large-scale Japanese buying of U.S. Treasury securities helped provide a floor for the dollar, analysts said. The U.S. currency changed hands at 98.52 yen to the dollar, down from 98.76.

Among Tuesday’s highlights:

* Analysts noted that the Dow average was lifted by a rally of 1 3/8 to 33 1/2 in shares of American Express, on the news that billionaire investor Warren Buffett had taken a large stake in the company.

* Stocks of semiconductor companies continued their recent rally. Texas Instruments was up 2 5/8 to 79 5/8, Micron Technologies rose 2 1/8 to 55, and Intel, which was upgraded by S. G. Warburg, gained 1 3/8 to 78 1/2.

* Pepsico rose 1 5/8 to 38 5/8 after its chairman told analysts the company may slow expansion of its company-owned restaurants unless they show improved performance.

* United Health Care fell 2 1/2 to 45 1/4 after reporting earnings that failed to impress the investment community.

* Retailer Limited rose 1 to 18 1/4 after reporting a 31% increase in its fourth-quarter profit.

* Two new stock issues were hot. Oak Technology a producer of multimedia semiconductors and software for personal computers, soared 7 1/2 to 21 1/2 on its first day of trading. And STB Systems, a maker of computer graphics adapters, gained 1 1/4 to 13 1/4.

Among foreign markets: In Tokyo, the Nikkei average shed 175.39 points to end at 18,138.47.

In Europe, Frankfurt’s DAX average was up 16.29 points to 2,133.24. In London, the Financial Times’ 100-share average ended at 3,071.3, down 9.8 points.

Mexico City’s Bolsa index eased 9.09 points to 1,921.08.