FINANCIAL MARKETS : Dow Hits Record as Bond Prices and the Dollar Slip

Market Overview

* The stock market climbed Tuesday, carrying a trio of trading indicators into record territory, as a rally in consumer product company stocks perked up a listless session.

* The yield on the long-term Treasury bond rose slightly as investors sold bonds to cash in on the recent run-up in prices.

* The dollar ended weaker against the yen after recovering from a new record low overnight amid mounting speculation that Washington favors a stronger Japanese currency.

Stocks

The Dow Jones industrial average rose 7.83 to 3,586.98, setting its third record in seven sessions and surpassing the previous peak of 3,583.35 reached Aug. 11.

The NASDAQ composite index advanced 4.12 to 731.01. It was the seventh closing high in 10 sessions for the chief barometer of over-the-counter activity and the second record in a row.

Trading stayed stuck in a narrow range until the afternoon, when buyers began flocking to food, tobacco and drug companies. Investors appeared to favor stocks that will withstand continuing economic weakness.

Among the market highlights:

* Winners on the Big Board’s active list included Philip Morris, up 1 7/8 to 48 3/8, and RJR Nabisco, up 1/4 to 5.

* Drug stocks benefited from buying amid hopes that the Clinton Administration’s health care reform plan won’t be as hard on pharmaceutical concerns as previously feared. Heavily traded gainers included Merck, up 1 3/8 to 30 7/8 on Big Board-leading volume of more than 4.8 million shares. Bristol Myers Squibb rose 1 1/2 to 54 5/8.

Glaxo’s American Depository Receipts gained 1 1/4 to 16 3/4 on word that the Food and Drug Administration had approved the U.S. marketing of Glaxo’s Zofran for treating post-operative nausea and vomiting.

* Among technology stocks, Hewlett-Packard lost 1 3/8 to 73 7/8. It posted a 44% jump in quarterly earnings, but the results at the nation’s No. 2 computer company were disappointing in terms of how order growth moderated in the period. IBM rose 2 to 43.

Intel gained 5/8 to 65 as the most heavily traded NASDAQ issue.

* McCaw Cellular Communications fell 1/4 to 56, retreating after rallying Monday on news that American Telephone & Telegraph will buy all of the cellular telephone operator in a $12.6-billion stock swap. AT&T; was up 1/8 at 60 7/8.

Overseas, London’s Financial Times 100-share index hit a new closing high, rising 16.7 points to 3,025.0. Frankfurt’s DAX 30-share index dropped 2.02 points to 1,910.17. Tokyo’s Nikkei average was down 59.51 points to 20,841.98.

Other Markets

Treasury bond yields rose from lows reached Monday, but many traders and analysts remained bullish about the prospects for the long bond’s yield to soon resume plunging to new records. Bond prices and yields move in opposite directions.

The yield on the benchmark Treasury 30-year bond edged up to 6.31% from Monday’s 16-year low of 6.30%.

Several market participants said Tuesday’s modest decline was little cause for concern.

The dollar was quoted in late trading at 101.05 yen, down from its close at 101.68 on Monday. But it had recovered after striking a new post-World War II low of 100.25 yen in overnight trading in Asia.

The dollar was at 1.6935 marks in late New York trading, up from 1.6858 on Monday.

Gold prices fell $1.50 from Monday’s close on New York’s Commodity Exchange, where bullion for the most-active December contract ended at $374.90 an ounce.