Slumping Dollar Halts Stock Rally

Stocks stumbled badly on Thursday, after a dizzying drop in the dollar sent bond prices reeling.

The Dow Jones industrial average fell 25.29 to 4,767.40 after paring a loss of 47 points logged earlier in the session. Decliners led advancers by more than 12 to 7 on the New York Stock Exchange. Volume was heavy at 367.02 million shares as of 4 p.m., but down from 399.41 million on Wednesday.

Investors shed stocks of all descriptions, pushing most broad-market stock indexes lower as well.

The dollar’s weakness caused the market rout, “plain and simple,” said Timothy Heekin, Salomon Brothers’ top stock trader. “It caused bonds to just fall off a cliff, and stocks followed right along with them.”

Some stock market participants said the market used the weak dollar and bonds as an excuse to take profits out of a bloated market.

“Stocks have had a big rally, so that makes them vulnerable to negative moves,” said Barry Berman, head stock trader at Robert W. Baird & Co.

Some of the stocks that moved substantially Thursday:

NYSE

AT&T fell 1-1/8 to 62-5/8.

The stock was giving back some of its 6-1/8 point gain on Wednesday, after the telephone giant said it would split into three publicly traded companies and jettison its weak computer technology unit, the former NCR, which it acquired in 1991.

Merck rose 1-1/2 to 56-1/2.

Eli Lilly rose 1 to 90.

Pfizer rose 1-7/8 to 50-3/4.

Johnson & Johnson rose 2-1/8 to 73-3/4.

Drug stocks rose in a positive reaction to a health care conference sponsored by Bear Stearns, and as investors bought up issues that might perform well during an economic downturn. Also, Merrill Lynch upgraded Merck and Lilly.

NASDAQ

MCI Communications rose 1 to 26-7/8.

SHL Systemhouse fell 1/64 to 12-5/8.

MCI agreed to buy SHL, an information technology service provider, on Wednesday for about $1 billion. In addition, AT&T, MCI’s long-distance rival, said Wednesday it would split into three publicly traded companies.

AMEX

Royal Oak Mines rose 1/8 to 4-7/16.

Echo Bay rose 5/8 to 11-1/4.

Pegasus Gold rose 1/2 to 13-3/8.

Gold stocks rose, bucking a market sell-off, as investors took shelter in defensive names.