Stocks were pulled back sharply and bond yields rose Tuesday as the dollar's profound weakness troubled investors, but some market analysts shrugged off the setback on Wall Street.
Selling of equities intensified as the dollar plunged to untested depths against the Japanese yen and German mark. The stock slide grew severe enough at one point to set up curbs on certain computer-guided program trading on the New York Stock Exchange.
All the popular stock market measures managed to bounce off their bottoms of the day, but they still ended down sharply.
The Dow Jones industrial average lost 34.93 points to close at 3,962.63. The NYSE composite index fell 1.86 points to 261.25, and the Standard & Poor's 500 index shed 3.51 points to 482.12. The Nasdaq Stock Market composite index lost 6.44 points to 791.33, and the American Stock Exchange market value index slid 2.33 points to 449.74.
In the broader market, declining issues beat advances 1,673 to 587 on heavy trading of 355.56 million shares on the NYSE. On Monday, 299.83 million shares changed hands.
The dollar plunged to all-time lows against the German mark and the Japanese yen in a global selloff that pointed to a fracturing faith in the U.S. currency.
The dollar fell as low as 1.360 marks in New York before recovering to close at 1.370, down nearly 3 1/2 pfennigs from Monday's close of 1.405 marks.
Against the yen, the dollar dropped at one point to 89.05 yen before rising late in New York to 90.05--still down sharply from 92.80 late Monday.
However, the dollar closed at 6.795 pesos--a new low for the peso for the third straight day. It closed at 6.575 on Monday. The peso has lost almost half its value against the dollar since Dec. 20.
Bond yields continued to rise as the dollar fell, with investors worried about inflation and the possibility of higher interest rates to support the sagging U.S. currency.
The yield on the Treasury's key 30-year bond finished the day at 7.62%, up from 7.59% on Monday. Its price, which moves in the opposite direction, was down 11/32 point, or $3.44 per $1,000 invested.
Market analysts were not alarmed by the stock market's performance, however, saying that shares were ready for a rest after an extended run that recently carried key indicators, including the Dow industrial average, to record heights.
One stock group that managed to buck the downtrend was precious metals. Stocks of gold mining companies gained as the price of gold soared to a six-week high as global investors ran for shelter from the free-falling dollar.
On New York's Commodity Exchange, April gold surged $5.20 an ounce to end at $385.40 an ounce. Silver also rose, gaining 19.2 cents to close at $4.695 an ounce, and April platinum gained $13.50 to $421.30 an ounce on the New York Merc.
Among Tuesday's highlights:
* Gold stocks studded the active lists of all the major exchanges. Barrick Gold was up 1 1/2 to 23 1/4; Placer Dome, up 1 5/8 to 21 5/8; Homestake, up 1 3/8 to 17 1/4; Battle Mountain Gold, up 1/2 to 10 1/4, and Newmont Mining, up 3 to 40 5/8.
* Among the weaker groups were high-technology stocks, which had been the market's main source of strength in the past two sessions. IBM dropped 1/2 to 79 3/4, and 3Com lost 13/16 to 56 15/16.
* Hancock Institutional Equity Services downgraded three semiconductor stocks, saying it expects a peak in semiconductor chip demand in the next three to four months. Texas Instruments lost 1 7/8 to 86 5/8, Intel Corp. fell 1 7/8 to 80 3/8 and Lattice Semiconductor lost 1-5/16 to 24 5/8.
* Computer Associates International fell 2 3/8 to 61 1/4 after Morgan Stanley downgraded the stock, citing its recent price gains.
* Athena Neurosciences sank 1 3/4 to 6 5/8 after the Food and Drug Administration told the company that its new-drug application for Zanaflex, a treatment for spasticity of spinal cord origin, is not approvable.
London's FTSE-100 average ended down 24.9 points at 2,977.0, and Frankfurt's 30-share DAX average fell 16.98 points to 2,053.34. In Tokyo, the Nikkei 225-share average closed off 85.44 points at 16,955.28. Mexico's Bolsa index inched 1.48 points to 1,524.20.
Market Roundup, D10