Dow, Dollar Edge Higher; Yields Decline

Blue-chip stocks, bond prices and the dollar all edged higher Tuesday, but the gains were limited as investors awaited today’s conclusion of the Federal Reserve Board’s meeting on interest rates.

The Dow Jones industrial average shrugged off an early afternoon deficit of 38 points, rising 27.32 to 6,833.48, about 50 points shy of Jan. 21’s all-time best close at 6,883.90.

The Standard & Poor’s 500 list and the New York Stock Exchange composite index set new highs, but the Nasdaq market lost ground as investors moved to secure some profits on the recent strength in technology issues.

Although no decision was expected until today, the focus of the day was the Fed’s periodic meeting on the economy and the central bank’s interest rate policy. Few observers expect any action.

There was little reaction to Tuesday’s economic news, but bond prices began to rise in the afternoon, sending interest rates lower and lifting blue-chip shares from the morning’s modest decline.

The Commerce Department reported that new-home sales dropped a smaller-than-expected 1% in December, reinforcing worries that the pickup in the economy late last year could aggravate inflationary pressures such as labor shortages and rising wages.

But the Conference Board research group reported that its index of future economic activity advanced just 0.1% in December, meeting analyst forecasts.

It was the sixth straight winning session for bonds, dropping the yield on the 30-year Treasury to 6.70% from Monday’s 6.74%.

Declining issues outnumbered advancers by a 10-9 margin on the New York Stock Exchange. The S&P; 500 rose 2.53 points to 789.26 for its second straight record close. The NYSE composite index rose 0.86 point to 413.34.

The Nasdaq composite index fell 2.30 points to 1,373.75. The Russell 2,000 index fell 1.21 points to 368.32.

In currency markets, the dollar’s gains were limited as traders awaited the end of the Fed meeting and Friday’s January employment report. In New York, the dollar cost 122.44 yen, up from 121.68 on Monday.

Among Tuesday’s highlights:

* Much of the Nasdaq market’s decline resulted from growing jitters about growth in the computer networking sector. Cisco Systems fell 1 1/8 to 67 1/8 in advance of its earnings report, which came out after the close of trading and exceeded expectations. 3Com, which has warned of weak December results, slid 3 1/4 to 58 3/4. Cascade Communications, which tumbled two weeks ago after reporting poor results, fell 1 3/8 to 37 3/4.

Meanwhile, several tech bellwethers struggled higher after some early profit taking. Intel rose 7/8 to 164 3/4, and Microsoft rose 3/4 to 103 1/8. But IBM was again among the Dow’s biggest decliners, falling 1 1/4 to 153 5/8.

* Banks and other financial companies sparked the afternoon rebound amid optimism that the Fed will stand pat on interest rates. Chase Manhattan rose 2 5/8 to 96 3/8, Citicorp gained 1 to 119 3/8 and BankAmerica rose 1 1/8 to 114 5/8.

* AT&T; fell 1/8 to 39 1/4 after Chief Financial Officer Richard Miller resigned, marking the third departure from the nation’s largest long-distance company’s top ranks in the last six months.

* Investors were somewhat kind to two new public offerings. Circuit City Stores’ CarMax unit rose 1 1/8, or 5.6%, to 21 1/8 on its first day of trading, not as much as expected, as the company sold shares well above the expected offering price of 20. Another IPO, Vail Resorts, rose 1/2, or 2.3%, to 22 1/2, after rising as high as 24 1/2. Its offering price was 22.

Overseas, Tokyo’s Nikkei stock average rose 1.3%, Frankfurt’s DAX index rose 0.2%, and London’s FTSE-100 rose 0.1%.