Blue Chips Pace Market Decline; Dow Off 5.85

NEW YORK —  The stock market gave ground today, failing to follow through on the rally of the previous session that was prompted by the dollar’s decline.

Blue chips were the biggest casualties.

The Dow Jones average of 30 industrials fell 5.85 points to 1,265.24

Losers outpaced gainers by about four-to-five on the New York Stock Exchange.

Big Board volume totaled 107.53 million shares, against 119.17 million in the previous session.

The NYSE’s composite index fell 0.22 to 103.69.

At the American Stock Exchange, the market-value index was down 0.47 at 224.18.

On world currency and bullion markets, trading stabilized somewhat after Tuesday’s frenzied session, in which the dollar staged its biggest one-day drop in at least 14 years and gold posted its sharpest gain in more than a decade.

The frenzy was blamed on fears of renewed U.S. inflation, strife in the Middle East and worries about the closing of Ohio’s state-chartered savings.

The dollar’s decline was viewed as good news on Wall Street because it raised investors’ hopes that multinational companies’ earnings would improve, analysts said.

In Columbus, Ohio, legislation was signed today allowing 69 closed savings and loan associations to open and give depositors the opportunity to withdraw $750 per month until state officials permit the institutions to resume normal operations.

Gov. Richard Celeste, who on Friday ordered the savings and loans closed for three days to stem a run by depositors and then extended the so-called bank holiday through Tuesday, quickly signed the bill passed early today by the Legislature.

Meanwhile, the Commerce Department said today that Americans’ personal income rose 0.3% in February, half the gain of the previous month and the smallest increase since an identical rise last May. Consumer spending was up 0.7% last month, compared with a 0.8% increase in January.

Bond prices were mostly higher in light, early trading as a key short-term interest rate fell and following a government announcement of borrowing plans that were lower than traders had expected.

The federal funds rate, the interest on overnight loans between banks and a peg for many other short-term interest rates, slipped to 8.438% at midday from 8.688% late Tuesday.

Meanwhile, there was some relief following a Treasury Department announcement late Tuesday of plans to sell $16.25 billion in notes and bonds next week.

Analysts said that while the government’s demand for funds remains huge, traders had been bracing for an even larger auction schedule.

Next week’s sales include the auction of $6.25 billion in four-year notes on Tuesday, $5.75 billion of seven-year notes Wednesday and $4.25 billion in 20-year, one-month bonds on Thursday.

The Treasury Department also plans to sell $14 billion in short-term bills on Monday.

In the secondary market for Treasury bonds, prices of short-term governments were unchanged to up 1/32 point in early trading today, intermediate maturities rose 2/32 point and long-term issues were up point, according to the investment firm of Salomon Bros. Inc.

The movement of a point is equivalent to a change of $10 in the price of a bond with a $1,000 face value.

In corporate trading, industrials and utilities rose 1/8 point. Among tax-exempt municipal bonds, general obligations were unchanged and revenue bonds rose point.