Dow Rebounds From Early Slide, Rises 3.79

NEW YORK —  Wall Street stocks finished a trace higher today after the market recovered completely from an early slide triggered by a fall in the dollar.

The Dow Jones industrial average closed up 3.79 points at 2,456.56.

Advancing issues outnumbered declines by about 8 to 5 on the New York Stock Exchange, with 879 up, 552 down and 508 unchanged.

Big Board volume totaled 127.70 million shares, up from 68.87 million in the previous session.

The NYSE’s composite index rose .74 to 179.25.

Earlier the Dow index had lost about 16 points in reaction to the dollar’s fall below 1.9 West German marks for the first time in two months.

But the market recovered around noon, helped in part by renewed interest in takeover issues and some futures-related buying.

In a Wary Mood

Analysts said recent economic reports showing a further slowdown in business activity over the last couple of months had put investors in a wary mood.

They said people who had been enthusiastically embracing hopes for a “soft landing” now have begun to wonder whether something a bit bumpier might be in store.

Confirmed optimists on Wall Street argue that the Federal Reserve will counter any such perils by relaxing its credit policy, giving the economy a shot of adrenaline and allowing interest rates to fall.

The Federal Open Market Committee, the central bank’s policy-setting group, is meeting today and Thursday to consider what to do next. Evidence of its decisions may be forthcoming soon in the credit markets.

A sell-off overseas and a weak dollar helped depress bond prices today, while short-term interest rates headed lower amid continued speculation that the Federal Reserve will ease its credit policies.

The Treasury’s bellwether 30-year bond tumbled 7/8 point, or around $8.75 per $1,000 face amount, by midday. Its yield, which moves inversely to its price, jumped to 8.13% from 8.06% late Monday.

The financial markets were closed on Tuesday in observance of the Independence Day holiday.

Bond traders attributed today’s downturn to the dollar’s decline in foreign exchange and to heavy selling of U.S. bonds in Japan, with some pointing to the sale of $500 million of 30-year securities by a trust bank there.

Traders said the Japanese are concerned that the dollar would continue to decline as the Fed eases short-term interest rates to prevent the U.S. economy from falling into a recession.

The Federal Open Market Committee began its two-day policy-making meeting today, and many analysts predict that the consensus there will be toward easing credit.

Short-term rates plunged as a result today.

Yields on three-month Treasury bills fell to 8.04% as the discount plunged 16 basis points to 7.79%. Yields on six-month bills fell to 7.97% as the discount fell 5 basis points to 7.57%. Yields on 1-year bills held at 8.02% and the discount was unchanged at 7.47%.

A basis point is one-hundredth of a percentage point. The yield is the annualized return on an investment in a Treasury bill. The discount is the percentage that bills are selling below the face value, which is paid at maturity.

But the federal funds rate, the interest on overnight loans between banks, was unchanged from Monday at 9 7/16%.

In the secondary market for Treasury securities, prices of short-term government issues were unchanged to 1/16 point lower, intermediate maturities fell between 1/8 point and 11/32 point and long-term issues dropped from 1/2 point to 7/8 point, according to Telerate Inc.