Sears’ Gains Offset Drop; Dow Down 9.46

Market Overview

Highlights of Tuesday’s market activity, compiled from Times staff and wire reports:

* A surge in the stock of Sears, Roebuck, which announced a restructuring, helped offset the dampening effect of a plunge in IBM--but the Dow Jones industrial average still lost ground.

* The dollar continued to drop against most major currencies.

Stocks

Blue chips fell as investors traded cautiously ahead of a key unemployment report Friday.

The Dow Jones index lost 9.46 points to 3,266.80. In the broader market, advancing issues led declines 865 to 810.

Volume on the New York Stock Exchange was 170.4 million, up from 157.5 million shares Monday.

After the market close, IBM said it is cutting 40,000 workers this year, double its original estimate. It said it is shutting facilities and setting aside $2.1 billion to pay for the measures.

“If it wasn’t for Sears, the Dow would be down 12 to 13 points,” said William Raftery, a technical analyst at Smith Barney.

Sears unveiled a restructuring that will turn Dean Witter Financial Services Group and Allstate Insurance Group into separate, publicly traded companies.

The move will allow the nation’s third-biggest retailer to concentrate on its core business and its successful insurance operation. Sears stock shot up 3 3/8 to 44 3/4 in active trading.

Among market highlights:

* Other actively traded blue chips included General Motors, unchanged at 32; GTE, which rose 1/4 to 33 3/4, and Time Warner, which fell 1 to 24.

* Many health stocks rebounded. Medical Care America was up 1 1/2 to 23 5/8; Merck, up 3/4 to 44; Bristol Myers, up 1 1/8 to 63 3/4, and SmithKline, up 2 1/4 to 43 1/2.

* Tenneco rose 1 1/8 to 36 1/2 on anticipation that the company will show improved earnings in the third quarter.

* Morgan Stanley repeated buy ratings on Consolidated Rail, CSX Corp., Norfolk Southern and Union Pacific. Conrail climbed 1 1/2 to 40 3/4, CSX rose 1/2 to 58 1/2, Norfolk Southern jumped 7/8 to 56 1/4, and Union Pacific rose 1/4 to 54 1/4.

* Oppenheimer came out with buy ratings on Huffy, Bombay and Heilig-Myers. Huffy added 1/2 to 12 3/4, Bombay rose 1/4 to 36 3/8, and Heilig-Myers climbed 1/2 to 32 1/2.

Stocks were mixed overseas. Tokyo’s 225-share Nikkei average fell 224.52 points to 17,748.09. The drop reflected the failure of public funds to support the market and fears about the strong yen.

In London, the 100-share Financial Times index gained 5.5 points to 2,565.5. Frankfurt’s 30-share DAX index edged up 1.22 points to 1,476.26.

Credit

Bond prices eased, reflecting doubts that the Federal Reserve will be able to lower interest rates despite more news of economic weakness.

The price of the Treasury’s main 30-year bond fell 9/32 point, or $2.81 cents per $1,000 in face amount. Its yield, which rises when prices fall, rose to 7.36% from 7.34% Monday.

The federal funds rate, the interest on overnight loans between banks, fell to 2.750% from 3.375% Monday.

Currency

Top Japanese policy makers expressed public dissatisfaction with the record high yen, hoping to discourage further buying--but the yen continued to appreciate against the dollar.

It did the same in Germany, where the government announced that the inflation rate remained high in September--3.6%--making it unlikely that the Bundesbank will lower interest rates soon.

Lower interest rates might help the dollar regain some ground against the mark.

The dollar slipped to 119.25 Japanese yen in New York from 119.65 Monday. It dipped to 1.4110 German marks from 1.4525. The British pound fetched $1.7895, up from $1.7295.

Fearing that a stronger yen will hit export-oriented industries hard and play havoc with interest rates, Japanese economic ministers offered stern warnings to foreign exchange traders about the direction of the currency.