Stocks Mixed in Cautious Trading; Dow Slips 0.22

Stocks were mixed in moderate trading Wednesday as a late rally in the previous session failed to gain momentum.

Oil, aerospace and telephone issues paced the gainers, while several paper and airline stocks retreated.

The Dow Jones average of 30 industrials slipped 0.22 to 1,278.49, after climbing 12.15 points to a seven-week high Tuesday. The Dow Jones transportation and utility averages also lost a fraction.

Big Board volume slowed to 99.60 million shares from 108.92 million Tuesday.

The market showed little direction throughout the day, dampening hopes that Tuesday’s late rally might be the start of a sustained upturn rather than an isolated event.

Instead, the market resumed its uninspired performance of recent weeks, which analysts have said partly reflects investors’ confusion about the direction of the economy and interest rates.

Auto Issues Mixed

Auto stocks were mixed as the major U.S. car makers reported a 22.5% gain in mid-April sales. Chrysler was up 1/8 to 37, but General Motors fell 3/4 to 70 3/8 and Ford Motor lost 1/8 to 43. GM also said it will recall 1.8 million mid-size cars and small trucks to modify their rear brakes.

Unocal, trying to thwart the takeover effort of T. Boone Pickens Jr., fell 1 5/8 to 47 5/8 and again topped the NYSE’s active list.

Elsewhere among the oils, Mobil rose 1 to 30 5/8, despite reporting a decline in first-quarter profit, Atlantic Richfield jumped 3 1/2 to 52 in heavy trading and Exxon fell 1/2 to 51 7/8.

The rise in Arco stock apparently was fueled by a favorable research report from the Dean Witter Reynolds brokerage as well as speculation that the company might buy back additional shares or that it might become a takeover target. An Arco spokesman said the company, as a matter of policy, does not comment on rumors.

Anheuser-Busch rose 3/8 to 81 1/2. The brewer announced higher first-quarter earnings and a 3-for-1 stock split payable June 14.

Tonka climbed 4 3/4 to 35 3/4, a 52-week high, after reporting higher first-quarter earnings.

Westinghouse was up 5/8 at 31 1/8 after lifting its quarterly dividend to 30 cents a share from 25 cents, payable June 1.

Mitel fell 3/8 to 5 3/4 after a 769,600-share block crossed at 5 5/8.

The federal funds rate, the interest on overnight loans between banks, traded at 8%, compared to a range of 7.875% to 8.25% on Tuesday.

Bond prices fell as the Treasury sold $9 billion of two-year notes. Interest rates generally edged higher.

The average yield on the newly sold notes was 9.81%, down from the 10.86% yield that accompanied the previous sale of such notes April 1, the Treasury said. It also was the lowest yield since May 2, 1983, when the yield was 9.61%.