FINANCIAL MARKETS : Yields Rise on Inflation Concerns

Lingering concerns about the dollar and comments by a Federal Reserve Board official that economic growth remains surprisingly strong sent Treasury bond yields higher Tuesday, putting new pressure on the stock market.

In a late selloff, the yield on the Treasury’s 30-year bond rose to 7.86% from 7.82% Monday, and shorter-term yields also inched up.

On Wall Street, the Dow industrials eased 6.39 points to 3,917.54 in moderate trading.

Analysts said markets were still on edge about the dollar’s latest slide. The buck rebounded slightly against key currencies Tuesday but was well short of making up Monday’s losses, which followed a slim election victory by German Chancellor Helmut Kohl.

“The only thing that’s driving the market is the dollar,” said Frank Sanella, senior money market analyst at Technical Data in Boston.

In New York trading, the dollar finished at 1.503 German marks, up from Monday’s two-year low of 1.499 marks. Against the Japanese yen the U.S. currency rose to 97.75 Tuesday from 97.65 Monday.

Meanwhile, the bond market’s late nervousness was attributed to comments made by Federal Reserve Board Governor Susan Phillips in an address at a savings bank conference.

Phillips said the U.S. economy is growing at a rate that continues to surprise many analysts. Some bond traders viewed that as code for Fed concerns that credit still hasn’t been tightened enough to slow the economy to an acceptable, low-inflation pace.

Even so, trading activity was light in the bond market, so the effect of Phillips’ comments was exaggerated, analysts said.

On Wall Street, stocks mostly drifted for a second day. Third-quarter earnings reports released during the day lifted some individual stocks, but the broad market couldn’t get its motor running, traders said.

Declining issues outnumbered winners by about 3 to 2 on the Big Board, on moderate turnover of 260 million shares. Among broad indexes, the S&P; 500 lost 1.30 points to 467.66.

Among the market highlights:

* “Earnings set a good tone early in the day with better-than-expected results from banks,” noted Philip Orlando, senior vice president at First Capital Advisers.

Among leading banks reporting quarterly earnings, Chase Manhattan rose 3/4 to 35 3/4, Citicorp jumped 1 1/4 to 44 1/8 and Wells Fargo eased 1/8 to 149 3/8.

* In the tech sector, Apple Computer surged 1 1/2 to 41 1/4 and Sun Microsystems rocketed 1 7/8 to 32 1/4. Both companies reported stronger-than-expected quarterly earnings.

Other tech stocks advancing included IBM, up 1 1/4 to 74 1/2, and Microsoft, up 1 1/2 to 56 5/8. But Lotus slumped 1 3/8 to 34 11/16 after saying quarterly earnings estimates from some analysts are too high.

* Indonesia Satellite Corp., the largest Asian initial public offering ever to be listed overseas, rose 16% on the NYSE on its first day of trading. The state-owned telecommunications company, known as Indosat, shot up to close at 37 1/8 from its offering price of 32 1/16.

Overeas, London’s FTSE 100 index fell 34.9 points to 3,085.3, while Frankfurt’s 30-share DAX average closed at 2,084.76, down 6.12 points.

Meanwhile, Tokyo’s Nikkei average gained 34.11 points to end at 19,992.40.

In Mexico City, the Bolsa index closed off 30.96 points at 2,725.01.

In commodities trading, cotton prices rallied to four-week highs Tuesday as steady rains flooding southeast Texas and parts of the cotton-rich Delta region threatened crops not yet harvested.

December cotton futures jumped 1.28 cents to 69.92 cents a pound, its highest close since September 20 at the New York Cotton Exchange.

The cotton market has been in retreat from a May 3 high of 86 cents a pound since it became apparent that U.S. farmers would produce a bountiful crop this year. Counterbalancing that were poor crops in major producing countries such as China, India and Pakistan and steady demand for cotton apparel.

The rains that have drenched Louisiana for the past 10 day could hurt farmers who had not yet harvested, experts said.

Market Roundup, D6

Interest Rates

30-year T-Bill: 7.86%

1-year T-Bill: 6.05%