FINANCIAL MARKETS : Dow Slips 2.36 as Bond Yields Rise

Financial markets mostly treaded water Wednesday, as stocks closed mixed while bond yields inched up to new 2 1/2-year highs.

The Dow Jones industrial average eased 2.36 points to 3,848.23, its fifth consecutive decline. But most broader market indexes were marginally higher in active trading, even though losers topped winners by 12 to 10 on the New York Stock Exchange.

As in Tuesday’s session, strength in energy stocks helped pull up blue-chip indexes such as the Standard & Poor’s 500, which added 1.09 points to 462.62.

Traders said the stock market fought to ignore creeping bond yields. The 30-year Treasury bond yield, which jumped past 8% on Monday for the first time in 2 1/2 years, continued to rise Wednesday, but at a snail’s pace.

The T-bond closed at 8.06%, up from 8.04% on Tuesday and the highest since April, 1992. Shorter-term yields were mixed.

Bonds had rallied briefly in the morning on a weaker-than-expected report on September big-ticket durable goods orders. But by afternoon, traders were focused again on the probability that the economy remains stronger than the Federal Reserve Board would like--raising the risk of another Fed credit-tightening move soon.

“Investors are increasingly concerned that the Fed is dragging its feet on monetary policy tightening and are worried that the economy won’t slow down to nip inflation pressures in the bud,” said Robert Giordano, director of economic research at Goldman, Sachs & Co.

A key number for the Fed will come Friday, when the government gives its estimate of third-quarter gross domestic product growth.

On Wednesday, bond investors’ reluctance to buy at current yields was evident in the Treasury’s auction of new five-year notes. The notes carried an average yield of 7.55%, the highest in more than three years and slightly above expectations.

The dollar, meanwhile, continued to be a problem for bond and stock markets. It fell to 1.4918 German marks in New York from 1.4940 on Tuesday, though it rose to 96.90 Japanese yen from 96.70.

Traders said the dollar was helped late in the session when French Economy Minister Edmond Alphandery said that “France would examine seriously the possibility of participating” in concerted central bank intervention to boost the ailing U.S. currency.

On Wall Street, analysts say stocks are likely to remain hostage to bond and dollar moves. “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.”

Among Wednesday’s market highlights:

* Energy stocks were broadly higher for a second day, on the heels of Mobil’s announcement that it plans new cost cutting. Mobil rose 5/8 to 83 7/8, Arco jumped 2 1/8 to 106 1/8, Exxon climbed 7/8 to 61 1/4, Phillips gained 3/4 to 35 5/8 and Louisiana Land jumped 3/4 to 45 3/4.

* Many technology issues rebounded, led by semiconductor issues. A forecast by the World Semiconductor Trade Statistics group predicted that the worldwide semiconductor industry will continue to grow at a 15% annual pace during the remainder of the decade and will reflect greater stability.

Among computer chip makers, Motorola gained 1 1/8 to 57, Intel added 1 1/8 to 60, Texas Instruments jumped 3 to 71 3/8 and Micron Technology surged 2 1/2 to 38 3/8.

* Some software stocks sparked to life. Powersoft soared 6 1/16 to 61 1/8, Peoplesoft zoomed 2 15/16 to 59 1/4, Sybase leaped 3 to 52 1/4 and Microsoft added 1 5/16 to 61.

* On the downside, Continental Airlines B shares tumbled 2 3/8 to 15 after its third-quarter earnings disappointed investors and its CEO was forced out.

* U.S. Surgical slumped 2 5/8 to 23 7/8. The Wall Street Journal reported that corporate insiders are selling the stock, suggesting that a rumored takeover of the company is not imminent.

* International Game Technology lost 1 to 17 7/8. The slot machine maker announced layoffs to reduce production.

Overseas, Frankfurt’s DAX 30 stock index rebounded 45.87 points to 2,020.50, while London’s FTSE 100 index eased 1.00 point to 2,999.90. In Tokyo, the Nikkei 225 index rose 14.20 points to 19,746.35.

In Mexico City, the Bolsa index rose 1.62 points to 2,580.00.

In commodities trading, copper prices rallied to a new round of four-year highs Wednesday, setting off warning signals among some traders who feel the market may be overbought.

At the Comex in New York, December copper futures jumped 2.75 cents to $1.22 a pound, the highest level since September, 1990.