Stock Market Shrugs as Interest Rates Drop

NEW YORK —  The stock market recorded a small gain Monday in a sluggish response to some dramatic new declines in interest rates.

Analysts said stock traders apparently had mixed feelings about the latest drop in rates because it stemmed partly from weaker-than-expected economic statistics.

The Dow Jones average of 30 industrials, off more than 3 points in early trading, closed with a gain of 3.12 at 1,702.95.

Volume on the New York Stock Exchange slowed to 129.93 million shares from 163.23 million on Friday.

Treasury Yields Down

The yield on the benchmark 30-year Treasury bond plunged to levels not seen since late 1977, and rates on shorter maturities also declined.

Prices of the Treasury bonds, which move in the opposite direction from interest rates, rose more than $20 for every $1,000 in face value.

But the stock market managed only a modest response, much as it did last week to news of discount rate reductions in West Germany, Japan and this country.

Analysts said opinions were sharply divided about whether more cuts were in the offing or whether the last overt actions to encourage lower rates had been seen for a while.

Japanese authorities said they had no immediate plans to lower their discount rate again, noting that they already had announced two half-point reductions this year.

So far, lower rates in this country have not produced convincing signs of a strong pickup in business activity. The government reported Friday that the civilian unemployment rate jumped to 7.3% from 6.7% in February.

Stock market investors evidently were heartened, however, by activity in International Business Machines, which rebounded 2 1/2 to 148 1/2 after a recent sell-off from a high of 161.

Among other leading computer and technology issues, Digital Equipment gained 2 7/8 to 161 1/2, Honeywell 2 1/2 to 74, Data General 1 5/8 to 37 3/8 and Burroughs 1 3/8 to 65 1/2.

Unfavorable Ruling

LAC Minerals tumbled 12 3/4 to 16 7/8. The Supreme Court of Ontario ruled that LAC must turn over a new gold mine at Hemlo, Ontario, to International Corona Resources.

White Consolidated Industries dropped 1 1/2 to 46 7/8. AB Electrolux of Sweden, which last week offered to acquire White Consolidated for $45 a share, made a new proposal at $47. Analysts said traders had been looking for a possible higher bid, perhaps from another party.

Libbey-Owens-Ford climbed 3 5/8 to 73. The company reported an agreement to sell its glass business to Pilkington Bros. of Britain.

Large blocks of 10,000 or more shares traded on the NYSE totaled 2,332, compared to 2,956 on Friday.

In the daily tally on the Big Board, advancing issues outnumbered declines by about three to two. The exchange’s composite index gained 0.49 to a new high of 130.87.

Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 159.77 million shares.

Standard & Poor’s index of 400 industrials rose 1.27 to 249.37, and S&P;’s 500-stock composite index was up 1.01 at 226.58.

The Wilshire index of 5,000 equities closed at 2,340.592, up 8.245 from Friday.

The NASDAQ composite index for the over-the-counter market added 1.69 to 363.93. At the American Stock Exchange, the market-value index closed at 260.78, up 0.73.

Bonds Rally

The bond market rallied and interest rates tumbled amid optimism about inflation and hopes that the Federal Reserve Board will opt for a more generous monetary policy.

Much of the market’s enthusiasm stemmed from speculation that oil prices will remain weak due to continuing discord among members of the Organization of Petroleum Exporting Countries, said Arnold Moskowitz of Dean Witter Reynolds.

A special meeting of the oil cartel is set for Sunday to discuss the price slide and unsuccessful attempts to get producers to agree on curbing output.

Moskowitz said comments made by Saudi Arabia’s King Fahd on Monday indicated that Saudi Arabia still might resist cutbacks in oil production. Analysts widely assumed that petroleum prices will not stabilize until production is controlled.

Pressure on Fed

Traders were also optimistic that economic weakness will induce the Fed to loosen its grip on credit conditions.

In the secondary market for Treasury securities, prices of short-term governments rose from 5/32 point to 7/32 point and intermediate maturities gained from 13/32 point to 1 11/32 points.

A key 20-year bond spurted 25/32 points, and the benchmark 30-year issue jumped 1 27/32 points, according to the investment firm of Salomon Bros.

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

The Merrill Lynch daily Treasury index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, rose 0.83 from Friday’s close to 116.61.

The Shearson Lehman Bros. composite government securities index, which makes a similar measurement, rose 8.33 to 1,221.76.

In the market for corporate securities, industrials gained 3/4 point in moderate trading and utilities were up 3/4 point in light activity.

Among tax-exempt municipal bonds, general obligations went up 3/8 point in quiet dealings and revenue bonds rose 3/4 point in average volume.

Treasury Bill Yields Off

Yields on three-month Treasury bills fell one basis point to 6.6%. Six-month bills dropped five basis points to 6.55%, and one-year bills slid five basis points to 6.58%. A basis point is one-hundredth of a percentage point.

Closing at 8%, the yield on the Treasury’s key 30-year bond was down from late Friday’s 8.15%. The bond briefly traded at 7.99%, the lowest level on a 30-year bond since December, 1977.

The federal funds rate, the interest on overnight loans between banks, traded at 7.375%, up from 7% late Friday.