Dow Rockets 86.46 Points on Dollar Gains, Economic News : Markets: Broad-based buying takes blue-chip index to another record high. Analysts cite optimism for a soft landing.

Stocks rocketed to record highs Wednesday, powered by investor enthusiasm over a sharply higher dollar and a fresh round of economic reports showing slow but steady growth in the economy.

The Dow Jones industrial average shot up 86.46 points to 4,465.14, topping its record high of 4,439.15 set on May 24. It was the largest one-day gain since Aug. 21, 1991.

The market got a boost from the dollar, which surged against the Japanese yen and the German mark after the Federal Reserve Board surprised traders by buying dollars in concert with the central banks of several European countries.

Traders estimated that the Fed, acting as the Treasury’s agent, spent $1 billion buying dollars and that the other participants joined in with another $1 billion.

Early gains were trimmed later in the day, though, and the dollar closed at 84.50 yen, up from 82.79 on Tuesday, and at 1.414 marks, up from 1.388.

Wall Street analysts said the market was back on a bullish track after the Dow index lost nearly 70 points last week to profit-taking. They said investors were more optimistic about the prospect of a soft landing for the economy when the Commerce Department revised first-quarter gross domestic product growth figures downward to an annual rate of 2.7%; the estimate last month had been 2.8%.

The Commerce Department also reported that sales of new homes dropped 2.7% in April despite milder weather and cheaper mortgages, pushing the supply of finished but unsold homes to the highest level in nearly five years.

Although the slow growth could foreshadow a downturn in corporate earnings, analysts noted that the GDP revision was due to a slower buildup in business inventories, which could in the long run prompt manufacturers to step up production.

“Lower inventories are bullish for the economy” and could therefore support stock prices, said Larry Wachtel, market analyst at Prudential Securities.

The Commerce Department also said corporate profits rose 3.4% in the first quarter, another sign that the economy may not be faltering.

But later, the Chicago Purchasing Management Assn. said its index of area business activity fell to 53.5% in May from 57.6% in April. The Chicago reading is watched closely for clues to the next index of the National Assn. of Purchasing Management, which is scheduled to release its May survey today.

The stock buying was broad-based and aggressive, with program trading helping to fuel the Dow’s rise.

Advancing issues led decliners by more than 2 to 1 on the New York Stock Exchange, where volume was a moderately heavy 358.16 million shares, up from 280.95 million on Tuesday.

Most broad market indexes also hit record highs. The NYSE’s composite index rose 4.57 points to 286.44, beating its previous record high close of May 16. The Standard & Poor’s 500-stock index added 9.82 points to 533.40, topping its May 24 record high. The American Stock Exchange’s composite index inched 0.77 point higher to 492.10, just above the previous record high close of May 16.

The Nasdaq composite, however, advanced 5.88 points to 864.58, below its May 23 record of 879.64.

Treasury bond yields fell, pushing prices higher after investors took heart from the industrialized nations’ effort to bolster the dollar’s value, analysts said.

Yields for the benchmark 30-year bond fell two basis points to 6.64%, while its price, which moves in the opposite direction, gained 7/32 point, or $2.19 per $1,000 in face value.

Among Wednesday’s highlights:

* The Dow was led higher by Procter & Gamble, up 2 3/8 to 71 7/8; DuPont, up 2 to 67 7/8; Minnesota Mining, up 2 to 60; Caterpillar, up 1 7/8 to 60 1/4; Philip Morris, up 1 7/8 to 72 7/8, and Merck, up 1 3/4 to 47.

* Investors took profits early in the session in the technology sector, but they resumed purchasing before the day’s end. IBM finished up 5/8 at 93 1/4. Micron Technology surged 3 to 44 5/8 in leading volume on the Big Board, and Intel added 1 3/4 to 112 1/4. Compaq was up 1 1/8 to 39 1/8, and Motorola added 1 to 59 7/8.

* Chrysler rose 1 to 43 5/8. Billionaire investor Kirk Kerkorian’s Tracinda Corp. withdrew its $55-a-share, $22.8-billion offer for the car maker.

* Soft drink stocks improved as investors bought recession-resistant issues. PepsiCo rose 1 5/8 to 49, and Coca-Cola rose 1 1/2 to 61 5/8.

* Drug stocks rose as investors took shelter in recession-resistant issues. Merck rose 1 3/4 to 47, Johnson & Johnson added 2 to 66 1/8, and Pfizer gained 1 5/8 to 88 1/8.

* Roberts Pharmaceuticals tumbled 4 1/8 to 19 3/8 after the company said its second-quarter results would be below Wall Street expectations.

* Seagram rose 1/8 to 30 after the Wall Street Journal reported that the company plans to establish and fund an entertainment company to be run by Sidney Sheinberg of MCA, in which Seagram recently agreed to acquire an 80% stake.

* FirstFed Michigan rose 2 1/2 to 29, and Charter One Financial rose 1/4 to 25. The thrifts, two of the largest in the Midwest, said they would merge in a $1.1-billion stock deal.

Overseas, the Tokyo stock market ended with hefty losses but was saved from registering a new closing low for the year thanks to arbitrage-linked buying. The 225-share Nikkei average lost 326.18 points, or 2.07%, to end at 15,436.79.

London’s FTSE-100 average rose 9.5 points to 3,319.4. Frankfurt’s 30-share DAX average ended 4.52 points higher at 2,092.17.

Mexico’s Bolsa index added 6.41 points to close at 1,945.13.

* COORDINATED INTERVENTION

The Fed and European central banks buy dollars. D3