NEW YORK — Stock prices suffered another big setback Thursday on fresh concerns over higher interest rates and a weaker dollar, in a market still struggling to recover from the jolt of Tuesday's record-breaking selloff.
The Dow Jones index of 30 industrials fell 34.44 points to 2,516.64, bringing its loss since the start of the week to 124.35 points.
Volume on the New York Stock Exchange came to 198.70 million shares, against 186.25 million in the previous session.
The index bounced back after briefly dropping below 2,500 in the last hour as the day's loss jumped to more than 50 points. On Tuesday, it dropped a record 91.55 points, followed by a pause Wednesday when it rose 2.45 in a mixed market.
"The market tested 2,500 twice yesterday and again today and bounced every time," said Frank Korth, analyst at Shearson Lehman Bros. "That's got to be a support level."
The market's slump follows a two-week rally that was an attempt to stitch the bull market back together. The market reached a peak of 2,722.42 on Aug. 25.
Technical analysts said the poor quality of the recovery rally invited a technical selloff this week.
The inability to rally from Tuesday's debacle worried investors anew, brokers said.
And a fresh decline by the dollar and government bonds revived concerns of higher inflation and interest rates and triggered a resumption of the big retreat.
"We broke down so badly that we need two weeks for the market to correct itself and regain its balance to advance again," Bear Stearns analyst Jack Solomon said.
Following the move by major banks across the nation Wednesday to boost their prime lending rates to 9.25% from 8.75%--the fifth increase this year--upward pressure persisted Thursday on open-market interest rates.
Rates on short-term Treasury bills climbed 20 to 30 basis points, or hundredths of a percentage point.
Prices of 30-year Treasury fell $5 to $10 for each $1,000 in face value, as yields on those long-term securities edged closer to 10%.
About the only positive development brokers could find was the behavior of stock prices late in the session, when they rallied after the Dow briefly dipped below 2,500.
Among actively traded blue chips, General Electric dropped 1 1/8 to 60; General Motors fell 2 to 76; International Business Machines dipped 1 to 151 1/2; Sears, Roebuck declined 1 1/8 to 48 7/8, and American Telephone & Telegraph edged down 7/8 to 32 1/2.
Foreign Exchanges Higher
Ford Motor was down 7/8 at 94 1/2 even though the company announced plans for a 2-for-1 stock split and a dividend increase.
Declining issues outnumbered advances by nearly 3 to 1 on the Big Board. The exchange's composite index of all its listed common stocks dropped 2.23 to 176.32.
Standard & Poor's index of 400 industrials fell 5.73 to 365.46, and S&P's 500-stock composite index was down 4.38 at 314.16. The Wilshire index of 5,000 equities closed at 3,108.819, down 39.126.
The NASDAQ composite index for the over-the-counter market lost 4.61 to 440.03. At the American Stock Exchange, the market-value index closed at 348.93, down 3.62.
On foreign exchanges, share prices were generally higher. In Britain, shares on the London Stock Exchange rose after Chancellor of the Exchequer Nigel Lawson forecast improved growth for the British economy.
The Financial Times stock exchange 100-share index rose 15.7 points to close at 2,375.5.
In Tokyo, stock prices soared in heavy trading to close at an all-time high as investors brushed aside Wall Street's recent worries and took heart from a recovery in local bond prices, brokers said.
The Nikkei 225-share index advanced 334.48 points to finish at 26,286.75, surpassing the previous record close of 26,118.42 set on Sept. 1.