Dow Drifts Higher in a Calm Session

Stocks edged upward Tuesday, taking a breather a day after the Dow Jones industrial average racked up its third-biggest gain ever.

Oil prices fell as Middle East tensions eased slightly after Iraq extended its deadline for expelling U.S. members of a United Nations weapons inspection team.

The bond market was mostly lower and the dollar was mixed against major currencies.

The Dow industrials, which surged 232 points Monday, wiped out a morning loss of 52 points and turned higher over the final hour, rising 14.74 points to close at 7,689.13. The Dow has now recovered all but 26 points of its staggering 554-point plunge Oct. 27.

Broader stock measures also brushed off some early weakness despite another big drop in Asia that threatened to dampen spirits on Wall Street.

Although trading was heavy by normal standards, volume continued to slow from the record-busting 1-billion-share crush seen last week. And for the first time in two weeks, the Dow did not swing at least 100 points during the session.

Many analysts were expecting a rockier day after the Hong Kong stock market--which ignited the global financial scare two weeks ago--slid to a 4% loss, spurring worries that investors would scurry to lock in Monday’s gains here.

“This could have been a day for retracement after what’s been a 10% move off [last week’s] lows,” said Steven Goldman, market strategist at Weeden & Co. of Greenwich, Conn., suggesting that investors here may have been encouraged to see other foreign markets show some resistance after the latest setback in Hong Kong.

In Tokyo, for example, the Nikkei stock average rose 0.3%. In Europe, Frankfurt’s DAX index fell 1.1%, and London’s FTSE-100 slipped 0.2%.

With so much attention being paid to global financial markets, economic news continued to command little attention from investors.

While almost any sign of economic strength would have spurred inflation worries just weeks ago, there was little reaction to a report suggesting the economy is headed for continued growth over the next six to nine months. Similarly, Monday’s robust reading on factory activity also failed to unsettle the market.

The widespread feeling is that the Federal Reserve Board, fearful of jostling an unstable financial market, won’t raise interest rates to slow the U.S. economy unless inflationary pressures become alarming. Furthermore, investors are figuring that Asia’s economic woes in Asia will soon slow things down here.

Advancing issues outnumbered decliners by a 10-9 margin on the New York Stock Exchange, where volume totaled 537.14 million shares.

The Standard & Poor’s 500-stock list rose 1.77 points to 940.00, the NYSE composite index rose 1.43 points to 494.06, and the Nasdaq composite index rose 1.17 points to 1,631.15.

Smaller companies fared slightly better than the blue-chip sector. The Russell 2,000 index of smaller companies rose 1.33 points to 442.31.

The yield on the 30-year U.S. Treasury rose to 6.24% from 6.21% at Monday’s close.

Among Tuesday’s highlights:

* The Dow’s biggest gainers were financial services issues: J.P. Morgan rose $2.19 to $116.25 and Travelers Group rose $1.56 to $72.94. That helped offset losses by DuPont, which fell $1.88 to $58, and Merck, which fell $2.31 to $88.19.

* Computer companies put in a mixed performance. Intel slid $2.56 to $75.94, about a point away from its Monday low. Microsoft rose 13 cents to $134.25.

Cisco Systems fell $1.31 to $83.44 and 3Com rose 19 cents to $43.63. Compaq Computer jumped $1.25 to $68.38 and rival Dell Computer gained $2.44 to $85.69. Hewlett-Packard rose 94 cents to $64.44.

* Regaining some of its losses of the day before, Fluor rose 25 cents to $37.25. On Monday it forecast a slowing of construction spending. Rival Foster Wheeler gained 6 cents to $32.56.

* Among individual issues, AMF Bowling rose $2.25 to $21.75 in its first day of trading. The owner and operator of bowling centers sold 13.5 million shares in an initial offering. Its ticker symbol is PIN.

Borders Group jumped $2.75 to $28.75 after it said it will break even in the latest quarter on higher book sales.

In commodities trading, news that Iraq agreed to extend a deadline for the expulsion of American weapons inspectors until the departure of the U.N. mission pushed oil prices lower.

At the New York Mercantile Exchange, crude oil for December delivery closed 26 cents lower at $20.70, down from Monday’s $20.96.

Keying off that market, oil products also closed lower, with December heating oil down 0.67 cent a gallon at 58.11 cents and December gasoline down 0.84 cent a gallon at 58.96 cents.

The dollar rose against the Japanese yen amid new signs of economic upheaval in Asia, but it fell sharply against European currencies, which drew even more funds away from the beleaguered yen.

The greenback rose to 122.15 yen from 121.32 yen on Monday. The dollar dropped to 1.7234 German marks from 1.7370 on Monday.