The stock market weathered some mid-session selling to post its third straight gain Monday.
Some broad-based market indicators bettered the record highs that they set at the end of last week. But the pace of trading slowed.
The Dow Jones average of 30 industrials, off a fraction at midday, closed with a 3.32-point advance at 1,277.50. The average jumped 26.94 points last week.
Volume on the New York Stock Exchange dropped off to 85.83 million shares from 140.26 million Friday.
Analysts said investors were still optimistic about the chances for progress toward shrinking the federal budget deficit. Late last week, the Senate passed a Republican-sponsored budget plan calling for many spending reductions.
Wall Streeters will be watching closely this week as the House of Representatives, where Democrats have some very different ideas, goes to work on its version of a budget proposal.
If some significant action is taken on that front, analysts reason, the Federal Reserve will be more inclined to relax its credit policy, encouraging interest rates to decline. One move in that direction might be a cut in the Fed’s discount rate--the charge it sets on loans to private financial institutions.
But some cautious observers warn that the market might be vulnerable to selling by disappointed traders should events not follow that script.
Brokers also said the temptation was strong for some traders to take profits after the market’s recent gains.
Precious-metals stocks moved up as the price of gold climbed $8.80 an ounce to $324.90 on the Commodity Exchange in New York.
ASA gained 1 5/8 to 53, Homestake Mining 3/4 to 25, Campbell Red Lake 5/8 to 21 1/8 and Dome Mines to 9 3/8.
Auto issues, by contrast, were generally weak. General Motors dropped 1 3/8 to 67 1/2, Ford Motor 1 to 42 and Chrysler 1 to 34 5/8.
Pan American World Airways led the active list, up 1/8 at 5 3/4. A 500,000-share block traded at 5 5/8.
Blue chips among the volume leaders included Exxon, up 1/2 at 50 1/2; International Business Machines, up 1/8 at 130, and American Telephone & Telegraph, steady at 22.
Jack Eckerd Corp. lost 1/8 to 22 3/4 on top of a 3 1/2-point drop last week, when the company said it expected to report a drop of about 50% in its profits for the fiscal quarter ended April 27.
Standard & Poor’s index of 400 industrials added 0.44 to 204.39 and S&P;'s 500-stock composite index was up 0.33 at a record 184.61.
Long-term government bonds posted modest gains in quiet trading, with little change in the prices of other maturities.
Trading was light in advance of a series of economic reports scheduled for later this week, including the government’s figures on retail sales and industrial production in April.
If the reports confirm a continuation of sluggish economic growth in the second quarter, the Federal Reserve would have an added incentive to accommodate lower interest rates, analysts said.
Last week, prices of some long-term issues rose nearly a full point, or $10 for every $1,000 in face value, despite the Treasury’s $20.5-billion auction of new notes and bonds.
At the end of the week, the bond market got an added lift from the Senate’s passage of a deficit reduction bill and a report of a smaller-than-expected 0.3% rise in wholesale prices last month.
In the secondary market for Treasury bonds, prices of short-term governments were narrowly mixed, ranging from a gain of 1/32 point to a decline of 1/32 point. Intermediate maturities ranged from a decline of 1/32 point to a rise of 1/8 point, and long-term issues were up 1/8 point to nearly 3/8 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 were unchanged.
Among tax-exempt municipal bonds, general obligations and revenue bonds also were unchanged, Salomon Bros. said.
Yields on 30-year Treasury bonds slipped to 11.18% from 11.20% late Friday.
The federal funds rate, the interest on overnight loans between banks, traded at 8.063%, down from 8.125% late Friday.