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Stocks Close Slightly Higher; Dow Up 4.97

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From Times Wire Services

Stock prices rose broadly Tuesday, adding to Monday’s slim gains, but finished below the highs of the session as confusion continued about the course of the economy and interest rates.

The Dow Jones average of 30 industrials, up 0.55 point Monday, rose another 4.97 points to close at 1,252.76 as 21 of the blue-chip issues gained ground. Earlier in the session, however, the stock market’s best-known indicator had been up nearly 10 points.

The modest gains in the first two sessions of the week followed a slide of nearly 28 points in the previous week.

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Meanwhile, three stocks rose in price for every two that fell Tuesday on the New York Stock Exchange. The NYSE’s composite index of all of its listed common stocks was up 0.41 at 104.59.

International Business Machines, a market leader because of its prominence in the investment portfolios of institutions such as pension funds, rose 1 to 125 3/4.

“The market was buoyed by hopes yet to be proven correct or justified,” said Monte Gordon, a vice president and director of research at Dreyfus Corp.

Gordon said many traders expect the Federal Reserve to stimulate sluggish economic activity by accommodating lower interest rates, but he said those traders are disappointed that there has been no action so far.

At the same time, he noted that many analysts believe that the economy already has picked up activity from a listless first quarter.

“The market doesn’t go down because of hopes for lower interest rates. But it doesn’t go up because traders don’t see action” by the Fed, he said.

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Meanwhile, contradictory reports surfaced on what the Fed is likely to do.

Preston Martin, vice chairman of the Federal Reserve, met with Japanese reporters in Tokyo and was quoted as saying that there is a strong possibility that economic growth in the second quarter would be at a lackluster 2.5% annual rate. The Japanese reports said Martin indicated that, depending upon economic activity, the Fed may have to make credit more readily available to stimulate growth.

But later, Fed Governor Martha Seger was quoted as telling a bankers’ conference in Phoenix that current economic problems would not be resolved by pumping up the money supply to lower interest rates.

Larry Wachtel, a market strategist at Prudential-Bache Securities, said stocks got an early lift from the bond market, where interest rates initially turned lower despite the start of a record $20.5-billion round of Treasury Department borrowing.

But as the Treasury launched an $8-billion auction of three-year notes later in the day, rates leveled out and the stock market gave up some of its gains.

Big Board volume climbed to 100.15 million shares from 85.65 million Monday. Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 119.18 million shares.

USF&G; was the most active issue as of the 4 p.m. EDT close of the NYSE, up 1/2 at 33 1/2 in trading that included a block of 1,790,500 shares crossing at 33 a share.

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Companies involved in mergers and restructurings also were heavily traded.

Uniroyal, which agreed late Monday to be acquired and taken private for $22 a share by a group including its management and the New York investment firm of Clayton & Dubilier, rose to 19 3/4 with more than 2.1 million shares changing hands.

Atlantic Richfield, which said it already has repurchased 10 million shares of its stock under a $4-billion stock buy-back program launched last week, was up at 63, a new 52-week high.

Mobil, which said Monday that it is scaling down its troubled Montgomery Ward unit to prepare the retail chain for independent operation, fell 1/2 to 32 1/8.

Other retailers rose, meantime, with Associated Dry Goods up 1/8 at 60, Federated Department Stores up 7/8 at 58 3/4, K mart up 7/8 at 35, J. C. Penney up 3/4 at 47 1/8, Sears, Roebuck up 3/8 at 34 and F. W. Woolworth up 7/8 at 42 7/8.

Standard & Poor’s index of 400 industrials rose 0.81 to 200.44, and S&P;’s 500-stock composite index was up 0.77 and 180.76.

At the American Stock Exchange, the market-value index rose 0.26 to 226.04.

The NASDAQ composite index for the over-the-counter market closed at 280.89, up 1.04.

The Wilshire index of 5,000 equities closed at 1,861.391, up 7.191 or 0.39% from the preceding day.

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Large blocks of 10,000 or more shares traded on the NYSE totaled 1,923, compared to 1,596 on Monday.

Bond prices were mostly higher in moderate trading Tuesday, and short-term interest rates were mixed as the Treasury Department began a record borrowing binge by selling $8 billion in three-year notes at the lowest yield in two years.

The average annual yield of 10% was down from the 10.40% at the previous quarterly auction of similar issues in February. It was the lowest average yield at such an auction since the 9.48% of May, 1983.

Today, the Treasury is scheduled to sell $6.5 billion of 10-year notes, followed by the auction Thursday of $6 billion in 30-year bonds.

In the secondary market for Treasury bonds, prices of all maturities were unchanged to up 1/8 point, 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.

In corporate trading, industrials and utilities rose point. Among tax-exempt municipal bonds, general obligations rose 3/4 point and revenue bonds were up 3/8 point.

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Yields on three-month Treasury bills rose 2 basis point to 7.76%. A basis point is one-hundredth of a percentage point. Six-month bills fell 1 basis point to 7.91%, and one-year bills were off 3 basis points at 8.07%.

Yields on 30-year Treasury bonds were unchanged from late Monday at 11.26%.

The federal funds rate, the interest on overnight loans between banks, traded at 7.75%, down from 8% late Monday.

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