Blue-chip stocks slashed their losses Tuesday after rebounding from a slide of nearly 50 points that was sparked by a plunge in the shares of heavy machinery maker Caterpillar Inc.
The Dow Jones industrial average ended 13.37 points lower at 4,767.04 following a recovery from an early 49-point loss. In the broader market, advancing issues led declines 1,102 to 1,080 on moderately active volume of 371 million shares on the New York Stock Exchange.
The Nasdaq composite index climbed 10.14 points to 1,060.32 on the strength of technology stocks, while the Standard & Poor's 500-stock and NYSE composite indexes ended at new highs.
Caterpillar, the world's biggest maker of heavy machinery and a component of the 30-stock Dow index, said that it expected its third-quarter profits to fall below year-ago levels and planned to cut production at several facilities around the world.
"Investors took Caterpillar out and shot it based on management's negative guidance," said Philip Orlando, a senior vice president at First Capital Advisers. Caterpillar tumbled 6 1/2 to 58 7/8.
Orlando said that investors may have over-reacted to Caterpillar's forecast, but it also served to underscore Wall Street's sensitivity to bad news at this late stage of the more than 9-month-old bull market.
Meanwhile, economically sensitive, or cyclical, stocks were depressed by the view that an interest rate cut was less likely after housing starts for August showed a stronger-than-expected rise, analysts said.
Among Tuesday's highlights:
* Deere & Co. was off 1 5/8 to 85 1/8, Ingersoll-Rand lost 7/8 to 38 1/8, Alcoa sank 1 1/8 to 54, DuPont was off 1 1/8 to 70 7/8, and Goodyear fell 7/8 to 38 7/8.
The Federal Reserve's policy-making Federal Open Market Committee meets Sept. 26 to review monetary policy. The Fed cut interest rates in July for the first time in nearly three years.
Analysts said investors were not necessarily interpreting Caterpillar's earnings warning as a sign that overall third-quarter corporate profits may hold a negative surprise.
"People are looking at stocks on an individual basis," said Marty Kearney, a trader at PTI Securities.
* Crown Cork & Seal shed 5 3/8 to 38 3/4 after it forecast its 1995 per-share earnings would be less than the $2.29 it reported a year earlier.
* Mylan Labs lost 3 to 20 5/8 after forecasting flat quarterly results.
* Easco tumbled 45%, or 5 1/2 to 6 3/4. The company said its third-quarter earnings will be significantly below second-quarter results.
* Stronger technology issues included International Business Machines, up 2 5/8 to 96 3/4, Texas Instruments, up 4 1/2 to 82 1/4 and Bay Networks, up 5 to 56.
The Standard & Poor's composite index of 500 stocks rose 1.43 points to a record 584.20. The NYSE Composite index of all listed common stocks rose 0.55 to a new high of 313.11.
The American Stock Exchange index was off 0.75 to 547.12.
In bond trading, the yield of the Treasury's main 30-year bond fell to 6.48% from 6.53% late Monday.
In late New York trading, the dollar ended at 104.63 yen, up from 103.35 yen Monday.
Gasoline prices also fell, and cotton prices lost ground after five consecutive sessions of big gains.
In overseas trading, Tokyo's Nikkei average closed up 155.22 points at 18,474.38. In London, the FTSE 100 index finished 8.1 points higher at 3,541.4.
Mexico's Bolsa index of 37 leading shares closed up 19.16 points at 2,561.08.
Market Roundup, D6