FINANCIAL MARKETS : Stocks Fall as Fed Stands Pat on Rates; Dow Loses 23.55

The Federal Reserve Board’s decision to leave interest rates alone--for now--sent short-term Treasury yields tumbling Tuesday, but the stock market could only muster a mixed finish.

News that the Fed’s monetary policy meeting ended without another credit-tightening move was greeted with a sigh of relief in the bond market. The yield on three-month T-bills dropped to 5.61% from 5.72% on Monday, and shorter-term rates in general fell.

On Wall Street, the Dow industrials slumped 23.55 points to 3,767.15 in a late selloff, but traders said the decline appeared unrelated to the Fed’s non-move.

Indeed, the broader market was mixed. Winners and losers were about evenly matched on the New York Stock Exchange, and most indexes of smaller stocks rose marginally.

After raising interest rates 2.5 percentage points so far this year in an effort to slow the economy, the inflation-wary Fed had been expected to hold monetary policy steady Tuesday--to wait for further signs that growth is slowing.

Yields on long-term bonds, which had been declining in recent weeks on the assumption that the Fed is succeeding in reining-in the economy and inflation, were little changed on Tuesday. The yield on the Treasury’s 30-year bond inched up to 7.84% from 7.83% on Monday.

The gold market, meanwhile, benefited as the Fed held back. The near-term gold futures contract on the Comex rose $2.60 to $381.80 an ounce.

Still, many analysts believe the Fed isn’t finished hiking rates, and that another increase of at least a half-point will come at the central bank’s next meeting on Jan. 31. For that reason, market strategists caution against betting on a major rally in stocks any time soon.

Among Tuesday’s highlights:

* Technology issues were again in the spotlight. Microsoft tumbled 2 3/4 to 59 7/8 after it said the next version of its popular Windows software won’t be ready until August. A spring introduction had been planned.

But Intel shot up 3 7/16 to 61 1/4 after the computer chip giant said it will replace its flawed Pentium chip free of charge--ending a public relations fiasco.

* Drug stocks staged a year-end rally, which some analysts attributed to optimism about potential additional patent protection under the GATT treaty. Bristol Myers gained 1 1/4 to 59 3/8, Lilly jumped 1 3/4 to 64 1/2 and Amgen advanced 13/16 to 55. But generic drug maker Mylan slumped 2 1/4 to 26.

* Nike shot up 5 5/8 to 71 5/8 after reporting surprisingly strong earnings. Other athletic shoe stocks also rose, including Reebok, up 1 7/8 to 39 1/2; and L.A. Gear, up 5/8 to 5 7/8.

In Mexico City, stocks rocketed after the government dropped the peso’s value versus the dollar, a move that will make Mexican exports cheaper. But the rally lost steam on news from troubled Chiapas state, where police and army troops were moving into recently captured rebel territory.

The Bolsa stock index, which plunged 96 points on Monday, was up as much as 167 points on Tuesday before closing with a gain of 43.06 points at 2,274.17.

In New York trading, many Mexican shares continued to decline. Telmex slumped 2 1/2 to 46, a new 1994 low.

In Tokyo, the Nikkei 225-share index gained 136.13 points to 19,406.98. London’s FTSE-100 index rose 23.7 points to 3,058.1 while Frankfurt’s DAX average ended at 2,079.93, up 3.99 points.