FINANCIAL MARKETS : Dow Slips 2.36 as Bond Yields Rise

Blue-chip stocks closed lower Wednesday as the rise in long-term bond yields to well over 8% and the weakening dollar appeared to drain more money from Wall Street.

The Dow Jones industrial average slipped 2.36 points to 3,848.23, declining for the fifth consecutive session.

Declining issues narrowly outnumbered advancers on the New York Stock Exchange. Big Board volume totaled 322.53 million shares, down from 326.10 million on Tuesday.

Small-company stocks outperformed blue-chip issues. Broader market indexes finished higher. Standard & Poor’s 500-stock index rose 1.09 points to 462.62.

The NYSE’s composite index rose 0.40 point to 253.91, the Nasdaq composite index climbed 4.98 points to 763.24, and the American Stock Exchange’s market value index added 0.68 point to 453.53.

For much of the session, stocks mirrored bonds, rallying briefly on weaker-than-expected economic data but retreating after the Treasury’s auction of five-year notes.

At the close, Treasury bond yields were higher amid persistent concerns that the Federal Reserve Board is acting too slowly to curb inflation pressures.

The worries came despite a report showing lower-than-expected orders for durable goods, a sign of economic weakness that ordinarily is welcomed by inflation-wary investors.

Hitting a new 2 1/2-year high, the Treasury’s 30-year bond rose to 8.06% from 8.04% on Tuesday. Its price, which moves in the opposite direction, dropped 3/16 point, or $1.88 per $1,000 in face value.

The Commerce Department said orders to U.S. factories for big-ticket durable goods rose only 0.1% in September, following a revised 6.4% rise in August. The September data was below most market expectations.

“The stock market is hostage to the bond market,” said Alfred E. Goldman, vice president at A.G. Edwards & Sons. “Bonds are not ready to stabilize at the moment. . . . At this level, stocks have not discounted the unknown top of the bond market.”

James Solloway, research director at Argus Research Corp., said the market was “bouncing around with bonds, and bonds are bouncing around with the dollar.”

The lower dollar also kept stocks from rebounding from their recent downturn, analysts said.

“We need a strong bond market rally and a strong dollar rally to get the market to rally successively,” said Alan Ackerman, market strategist at Reich & Co. “Just a relief rally isn’t going to do the trick here.”

The dollar closed in New York at 96.85 Japanese yen, up from 96.83 on Tuesday. It fell to 1.491 German marks, down from 1.495.

Even with the dollar “probing new lows against the yen and approaching new lows against the mark,” investors are not convinced that the federal government will intervene aggressively to protect the currency. That discourages foreign investors from buying dollar-denominated securities, including U.S. stocks.

Among the market highlights:

* Ford Motor, the last of the Big Three to issue third-quarter results, rose 3/8 to 29 1/4 after posting a $1.124-billion profit that beat Wall Street forecasts. Chrysler rose 1/4 to 47 3/4, while General Motors dipped 5/8 to 40 3/4.

* Continental Airlines tumbled 2 1/4 to 15 3/8 after its third-quarter earnings disappointed investors.

* McKesson jumped 5 3/8 to 105 1/4, boosted by a New York Times report that Eli Lilly & Co. had agreed to accept regulatory restrictions on its proposed purchase of McKesson’s PCS Health Systems. Eli Lilly fell 1/2 to 60.

* Sara Lee reported quarterly earnings of 33 cents a share, compared to 24 cents a year ago, and Goldman Sachs added the stock to its “recommended” list. It rose 1 1/8 to 24.

* Boeing rose 1/8 to 43 1/4 after reporting earnings that beat most Wall Street estimates.

* DuPont declined 1/8 to 73 1/8 after the company reported record third-quarter profit of 95 cents per share, contrasted with a loss of $1.01 a year ago.

* Sprint, which announced a venture with three major cable operators to develop telephone service for local markets, fell 7/8 to 32 3/8.

* U.S. Surgical fell 2 5/8 to 23 7/8. Insiders are selling the stock, suggesting that a rumored takeover of the company is not imminent.

In overseas trading, German shares ended sharply higher, with the DAX 30-share average up 45.87 points to 2,020.50. In Tokyo, the Nikkei 225-share average gained 14.20 points to end at 19,746.35, while London’s Financial Times 100-share average closed off 1 at 2,999.9. Mexico’s Bolsa index rose 1.62 points to 2,580.