Stocks Narrow Early Losses; Dow Slips 3.92

From Times Wire Services

Stocks posted a minor loss in sluggish trading Monday after recovering from a sharply lower opening.

A rebound in computer stocks contributed to the market's comeback. Several retail and drug issues also advanced.

The Dow Jones average of 30 industrials fell 3.92 to 1,320.56 after having lost nearly 12 points early in the day. On Friday, the measure soared 24.75 points to a near-record high.

Declines led advances four to three on New York Stock Exchange, whose composite index fell 0.20 to 109.65.

Big Board volume slowed to 96.04 million shares from 124.40 million Friday.

Prices tumbled after the opening bell in a reversal that Wall Street had anticipated following the market's strong rally Friday.

Many analysts considered that rally largely technical, saying it related heavily to the expiration of options and futures contracts on stock indexes.

As the contracts expired, professional investors aggressively traded both the index contracts and the stocks underlying those indexes, contributing to the rally in prices.

Profit Taking

With that factor out of the way, investors were expected to take profits early Monday.

But stocks gradually recouped much of their losses despite a downturn in the bond market.

Bond prices came under pressure because of indications that the economy is improving, which credit analysts believe could halt the recent decline in interest rates.

Yet stock traders were apparently encouraged by the prospect of a stronger economy, since it would help raise corporate earnings.

Last week, the Commerce Department said the economy, as measured by the gross national product, was expanding at a 3.1% annual rate in the current quarter, up from a meager 0.3% pace in the first quarter.

An upturn in the economy presumably would be of particular help to the struggling computer industry. Computer makers have attributed their slowdown largely to cutbacks in corporate capital spending caused by the economy's weakness earlier this year.

Computer Issues Gain

Industry leader International Business Machines paced the computer stocks' gains, climbing 1 1/2 to 120 7/8. Digital Equipment jumped 2 1/8 to 91 1/2, Data General rose 1 7/8 to 37 and Burroughs was up 1 1/2 to 58 1/2.

On the American Stock Exchange, Wang Laboratories' class B stock rose 1 1/8 to 17 1/2, helping the Amex market value index climb 0.96 to 226.63.

General Foods fell 2 1/8 to 80. A component of the Dow Jones industrial average, the stock soared 10 3/8 on Friday amid rumors that Philip Morris wanted to buy the company. Over the weekend, General Foods again denied that it is talking to any potential suitor. Philip Morris fell 1 to 84 7/8 on Monday.

Dow Chemical topped the NYSE's active list and fell 1/2 to 34 3/4. Also on the list were Citicorp, up 1 at 47 3/8; RCA, up 1 5/8 to 48 7/8, and Motorola, up 1 at 32 7/8.

American Hospital Supply rose 1 1/2 to 38 1/2 in heavy trading. The company, which previously agreed to merge with Hospital Corp. of America, received a rival bid last week from Baxter Travenol, which edged up 1/8 to 16. Hospital Corp. rose 1 1/2 to 49.

Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 117.42 million shares.

The Wilshire index of 5,000 equities closed at 1,947.422, down 3.414.

Standard & Poor's index of 400 industrials slipped 0.12 to 208.74, and S&P;'s 500-stock composite index was off 0.46 at 189.15.

Large blocks of 10,000 or more shares traded on the NYSE totaled 1,936, compared to 2,364 on Friday.

The NASDAQ composite index for the over-the-counter market closed at 289.97, up 1.26.

In the credit markets, short-term interest rates edged higher in advance of a $17-billion sale of new Treasury notes and bonds.

Bond Prices Fall

Bond prices fell last week for the first weekly decline since late April as hopes dimmed that the Federal Reserve Board would take new steps to relax its monetary policy.

The money supply has been growing at rates faster than the Fed has targeted for sustained, non-inflationary growth.

This week, the government plans to auction $17 billion in four-year and seven-year notes and 20-year bonds starting Tuesday.

In the secondary market for Treasury bonds, prices of short-term governments fell 6/32 point, intermediate maturities were off between 6/32 point and 14/32 point and long-term issues were down 1/2 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 were unchanged and utilities fell 1/8 point in light trading. Tax-exempt yields on municipal bonds were unavailable, Salomon Bros. said.

Yields on three-month Treasury bills were up 2 basis points at 7.07%. Six-month bills rose 1 basis point to 7.26%, and one-year bills were up 1 basis point at 7.42%.

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