FINANCIAL MARKETS : Dow Delivers Even as the Dollar Dips

The dollar tumbled again versus 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 on Wall Street, stocks pulled out modest gains near the close, with the Dow industrial average and the Nasdaq composite index both setting new highs. In the bond market, yields were marginally lower.

Meanwhile, 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 against the yen in trading overseas as sentiment toward the greenback fell further, one day after the government reported a record U.S. trade deficit for January.

“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 changing hands in New York at 1.4033 German marks, up slightly from 1.4027 marks Wednesday.

Stocks, meanwhile, were held back for most of Thursday’s session by dollar jitters, but still closed mostly higher.

The Dow industrials traded in a 26-point band all day, and finished up 4.84 points at a record 4,087.83--breaking the previous high of 4,083.68 set on Monday.

In the broad 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.

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.

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 30-year Treasury bond yield ended at 7.44% on Thursday, compared to 7.45% on Wednesday.

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. Hilton has previously announced it would consider selling out or restructuring.

Other hotel and gaming stocks rising included Promus, up 1 5/8 to 37; Circus Circus, up 1 1/2 to 30 3/8, and Mirage Resorts, up 1/2 to 25 5/8.

* Computer chip makers surged anew on talk of shortages of certain chips. 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.

* Other high-tech stocks also advanced. 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.

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

And 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.