FINANCIAL MARKETS : Dow Delivers Even as the Dollar Dips

The dollar tumbled against the Japanese yen on Thursday, hitting a record low in early U.S. trading after plunging overseas where dealers reacted to Washington’s report of a worsening trade deficit.

But stocks pulled out modest gains near the close, with the Dow Jones industrial average and the Nasdaq composite setting new highs as bonds and the dollar recovered from earlier weakness.

The dollar remained mostly unchanged against the German mark after the head of German’s central bank indicated he would consider lowering interest rates, a move that would support a sagging dollar.

The dollar was weighed down in heavy trading overseas as sentiment toward the greenback fell further in response to release of the U.S. trade report the day before.

“There was heavy trading overnight in Tokyo, and initially the market here took that lead and fell to the record low,” said Steven Flanagan, vice president of Credit Agricole in New York. “But it was able to swing back up, and it was mostly quiet after that.”

The dollar, which fell as low as 88.01 yen in early New York trading, ended the day at 88.15 yen, down from 88.95 on Wednesday.

The greenback was also changing hands in New York at 1.4033 German marks, up slightly from 1.4027 marks late Wednesday, and at 1.1630 Swiss francs, down from 1.1642.

Stocks meanwhile, were held back for most of Thursday’s session by the dollar and bonds.

The Dow Jones industrials traded in a 26-point band all day, finishing up 4.84 points at 4,087.83. The blue-chip index broke its record close of 4,083.68 set last Monday.

In the broader market, advancing issues led decliners by 1,046 to 1,012 on the New York Stock Exchange. Big Board volume was heavy at 321.45 million shares, up from Wednesday’s 313.12 million.

Broad market indexes also moved higher. The Nasdaq composite index climbed 2.29 points to 811.39, topping its record closing high of 810.49 set on Monday.

The NYSE composite index rose 0.12 point to 267.92. The Standard & Poor’s 500-stock index added 0.28 point to 495.95. The American Stock Exchange’s market value index advanced 2.37 points to 458.52.

Bond yields initially rose following the dollar’s plunge to a new low against the yen in early New York trading. Later, yields retreated amid rumors in the fixed-income market that the government’s report on durable goods for February, due out today, would show weaker-than-expected results.

Signs of weakness in the economy generally bode well for bond prices by easing fears that an overheated economy will trigger inflation. The Treasury’s key long-bond yield slipped to 7.44% from 7.45% on Wednesday. Its price, which moves inversely, ended up 3/32 point, or 94 cents per $1,000 in face value.

Among Thursday’s market highlights:

* Hilton Hotels jumped 3 1/4 to 72 1/2 on speculation that a British company put a $5.3-billion offer for Hilton on the table, market sources said.

* Coca-Cola fell 1 to 58 after its shares were downgraded.

* IBM gained 1 3/4 to 83 3/8 after Morgan Stanley raised the firm’s first-quarter earnings estimate.

* Computer chip makers rose because of strong prices for microchips. Micron Technology leaped 3 1/8 to 77 3/8, Texas Instruments shot up 3 1/4 to 91 5/8 and Intel rose 1 to 85 3/8.

* Computer stocks moved higher amid upbeat sales projections. Microsoft rose 1 13/16 to 72 3/4; 3Com added 2 1/16 to 57 5/8 and Adobe Systems climbed 1 1/4 to 38 3/4. Intel rose 1 to 85 3/8.

* Broderbund Software jumped 2 3/4 to 56 after reporting better-than-expected earnings.

* Roberts Pharmaceutical sank 8 to 26 3/4 after announcing that it expects sales and profits for the first quarter to be below analysts’ estimates.

* Home Depot fell 2 to 42 7/8. Smith Barney resumed coverage of the stock with an “outperform” rating on Wednesday.

Overseas markets were mixed. Renewed foreign sales forced Frankfurt’s 30-share DAX average down 48.02 points to 1,936.07. Tokyo’s 225-share Nikkei average shed 91.44 points to end at 15,813.41. In London, the FTSE-100 average closed at 3,136.4, off 3.3 points.

Mexico City’s Bolsa index gained 24.54 points to close at 1,615.70.