FINANCIAL MARKETS : Greenback and Dow Score Some Marks

The dollar rocketed higher in currency trading Thursday, gaining more than 3% against the German mark, the biggest single advance in almost four years, amid optimism over the economy and the likelihood of Congress tackling the U.S. budget deficit.

Stocks hit record highs for the fourth straight day, and long-term bond yields stayed at their lowest levels in more than a year.

The dollar was also propelled higher on large-scale buying from investors and traders who had sold the dollar short, or wrongly bet that the currency would fall. They bought dollars to minimize their losses, creating even more demand for the greenback in what is known as a short-covering rally.

In New York trading, the dollar was quoted at 85.65 Japanese yen, up from 83.91 on Wednesday and its highest level in more than a month. It closed at 1.432 marks, up from 1.388. That 4.4-pfennig jump was the biggest single-day advance since August, 1991.

The House Budget Committee’s approval of a balanced-budget plan helped support the dollar for most of the trading day.

The Senate Budget Committee is also moving toward approving its own similar budget-balancing blueprint.

The dollar was also boosted by weakness in the German mark against other European currencies.

The Dow Jones industrial average edged up 6.57 points to 4,411.19, posting a record close for the fourth consecutive session as investors eased up on their selling of technology issues but kept buying economically sensitive names. The dollar’s surge also aided stocks.

In the broader market, rising issues squeaked past decliners 1,146 to 1,128 on the New York Stock Exchange. Big Board volume was moderate at 331.37 million shares, down from the 382.47 million traded Wednesday.

Broad market indexes inched higher, with three breaking their record highs. The NYSE’s composite index rose 0.05 point to 282.46. The Standard & Poor’s 500-stock index added 0.01 point to 524.37. Both broke records set Wednesday.

The Nasdaq composite index advanced 6.21 points to 853.83, topping a record set last week.

The markets also reacted to some conflicting economic data.

The Labor Department said inflation at the wholesale level shot up by 0.5% in April, the biggest increase in five months. But the Commerce Department said retail sales fell 0.4% in April, the second drop in three months and new evidence of a slackening economy.

Reaction in the bond market to the reports was indecisive, slowing an impressive rally that has brought long-term bond yields below 7%. The 30-year Treasury bond yield closed at 6.98%, down from Wednesday’s 6.99%. Its price finished up 1/8 point, or $1.25 per $1,000 in face value. Prices and yields move in opposite directions.

Among other market highlights:

* The Dow 30 issues were led higher by United Technologies, which rose 1 7/8 to 76 3/8; International Paper, up 1 1/4 to 78 7/8; Alcoa, 1 1/8 higher at 44 1/2, and Eastman Kodak, up 1 1/2 at 61 1/4.

Intel, down more than a point early in the session, finished up 1/2 at 109 1/4. IBM rose 1/8 to 94.

* Shares of the nation’s Big Three auto makers fell back after rising Wednesday on news of the U.S. decision to impose automotive trade sanctions against Japan. General Motors dropped 7/8 to 45 1/8, Ford lost 7/8 to 27 1/2 and Chrysler was down 3/4 to 42 3/4.

* Kellogg rose 3 1/2 to 66 1/8 after the cereal maker was added to Goldman’s “recommended” list, a market source said.

* Hilton Hotels tumbled 6 5/8 to 71 1/8 after the company said it decided to split its hotel and casino operations. Traders said Wall Street was disappointed that the entire company was not put up for sale.

Overseas markets were mixed, with declines in Tokyo and Mexico and gains in London and Frankfurt.