The Dow Dives for Cover, Dropping 81

NEW YORK —  Stocks pulled back again Thursday as hints of new turmoil on world markets and bad news in the computer chip sector threatened to disrupt a fragile recovery on Wall Street.

Meanwhile, the dollar slipped against the Japanese yen and bond yields fell as investors rushed to safer havens such as U.S. Treasuries on news of U.S. military strikes against terrorist camps in Afghanistan and Sudan.

The Dow Jones industrial average ended down 81.87 points, or nearly 1%, at 8,611.41.

Declining issues outnumbered advancers by a 7-4 margin on the New York Stock Exchange in heavy trading.

The technology-dominated Nasdaq composite index fell 10.24 points to 1,832.45 despite big gains by leading computer-related names outside the semiconductor group: Dell Computer surged $4.19 to $122.13, Cisco Systems rose $1.38 to $102.63, and Microsoft jumped $2 to $112.56.

The Dow’s dive came after President Clinton said the United States had launched strikes against terrorist targets in Sudan and Afghanistan, believed to have been behind the Aug. 7 bombings of two U.S. embassies in Africa.

Stocks also fell on worries that a weak global economy will affect U.S. corporate earnings. Investors focused on Russia as it braces for major bank failures and speculation that Venezuela may soon follow Russia’s currency devaluation. Views that China may devalue its currency also added to market jitters.

The White House sex and perjury scandal also was still on the minds of traders as Monica Lewinsky, the former White House intern at the center of the storm, arrived for a second day of testimony before a federal grand jury.

“As long as the bombing doesn’t escalate into anything other than just two isolated incidents, it doesn’t mean much,” said Joseph Barthel, chief investment strategist at Fahnestock & Co. “It takes a little bit of heat off [Clinton’s] own personal life.”

The military strikes fueled a rush to safe havens such as U.S. bonds. The key 30-year Treasury’s price jumped, forcing its yield down to 5.51% from 5.55% on Wednesday.

There was also light safe-haven dollar buying, which was lower against the yen Thursday on lingering speculation that Japan would act to support its currency.

The dollar fell as low as 141.45 yen before bouncing back to 143.19 in late trading, still lower than 143.93 on Wednesday. The dollar also was higher against the German mark at 1.7990, up from 1.7982.

Among Thursday’s highlights:

* Financial stocks fell sharply amid speculation that struggling nations in Latin American might devalue their currencies like Russia did earlier in the week. Government officials in Venezuela denied rumors that the bolivar would be devalued by as much as 20%.

American Express slid $3.88 to $97.13, J.P. Morgan fell $3.69 to $122.81, and Travelers Group fell $2.13 to $56.06, leading the Dow’s retreat.

General Motors lost $2.06 to $66.50 and Ford Motor dropped $2.13 to $48.88. Both companies have big operations in Latin America.

* Semiconductor stocks also suffered heavy losses as Merrill Lynch lowered its investment rating on Intel, down $3.56 at $86, and Texas Instruments, down $1.63 at $58.88.

The downgrades came a day after a series of discouraging updates from chip maker National Semiconductor, which fell $2.06 to $11.56 in the aftermath of late Wednesday’s warning.

LSI fell 69 cents to $15.13, bringing its decline to 20% over three days. Applied Materials, the world’s largest maker of equipment used to produce computer chips, fell $1.44 to $31.25.

Overseas, London’s FTSE-100 fell 0.5%. In Tokyo, the 225-share Nikkei average closed down 0.10%.

Market Roundup, D6