The stock market plunged yesterday while other markets reacted cautiously and somewhat skeptically to the half-point increase in the discount rate.

The Dow Jones industrial average tumbled 38.11 points in slow trading to close at 2561.38, giving it a 77.97-point decline for the week and leaving it 161 points below the high of 2722.42 set 10 days ago. Analysts have said stock prices have been depressed on fears that the weakening dollar made a new surge of inflation more likely.

Stock prices initially were higher after the morning announcement that the Federal Reserve had increased the discount rate to 6 percent from 5.5 percent. But they began falling as it became apparent that the increase was not enough to significantly bolster the dollar and bond markets, as some analysts had hoped. More than 20 points of the Dow's decline came in the final hour of trading.

The dollar rose slightly in New York, but currency traders speculated that it soon would resume its recent decline. Bond prices also reacted tepidly. Prices of the closely watched 30-year Treasury bond fell about $2.50 per $1,000 value, following declines of more than $30 since Tuesday. Yields on the issues rose slightly, to 9.46 percent from 9.44 percent Thursday. Concerns about the declining value of the dollar had sent bond yields sharply higher in the first part of the week.

"It seems to me that the discount rate announcement on balance hurt the dollar and it hurt the bond market, and that's perverse to me, because the discount rate announcement was supposed to help the dollar and to a lesser degree help the bond market," said Robert Brusca, chief economist at Nikko Securities Inc. in New York.

Financial futures markets also reacted unenthusiastically, with futures prices for Treasury bonds and Eurodollars -- the key interest rate futures -- declining. "The reactions of the bond, Eurodollar and stock {markets} showed the sentiment that it was not enough to support the dollar," Jack Barbanel, an analyst for Gruntal & Co., a New York investment company, told the Associated Press. "Something else is needed."

"The Eurodollar got killed, and this is a key contract, because it's interest sensitive and also is tied to the dollar value," he said. Eurodollars for December delivery on the Chicago Mercantile Exchange closed the day at 91.48 points, down 19 ticks.

Usually, increases in the discount rate -- the interest rate at which financial institutions borrow money from the Fed -- batter the stock market and bolster bonds and the dollar, as higher interest rates make interest-bearing and dollar-denominated investments more attractive while increasing the costs to business of borrowed funds.

But analysts said yesterday's discount rate increase -- which set off a round of increases in prime lending rates at major banks -- was not enough to lure investment to the dollar and stop its decline. That in turn depressed the bond and stock markets.

The dollar rose to 141.95 yen in New York from 140.97 yen Thursday, to 1.7975 West German marks from 1.7907 the day before, and to 1.4885 Swiss francs from 1.4813. But the closing prices showed far narrower increases than earlier in the day, and traders said it did not appear that even those increases could be sustained in the days to come because of worries that the United States' huge trade imbalance will act as an anchor to drag the dollar down further.

The dollar has been declining steeply since last month's report that the U.S. trade deficit in June was a record $15.7 billion. Since Aug. 14, the dollar has lost 6.6 percent of its value against the yen.

Yesterday's stock market decline was widespread, with the New York Stock Exchange index falling 1.76 to 177.58 and Standard & Poor's 500-stock index declining 3.51 to 316.70. There were more than two declining issues for each stock showing a gain on the NYSE. Composite volume on the Big Board was just 149 million shares in slow preholiday trading.

The American Stock Exchange index fell 1.88 to 354.42, and the Nasdaq composite index of over-the-counter stocks dropped 1.88 to 446.188.