Dow Up 0.57 to Record but Closes Below 1,700

The Dow Jones industrial average edged up to new highs Monday but turned back from the 1,700 level as the stock market churned its way through a mixed session.

Dow Jones’ average of 30 blue chips crossed 1,700 at midday, then settled for a closing reading of 1,698.28, up 0.57 from Friday. While it was posting a new closing high, some other, broader market measures recorded modest declines.

Volume on the New York Stock Exchange came to 144.67 million shares, down from 177.59 million on Friday.

The market drifted lower for most of the morning. Analysts said many traders believed that stock prices had come a bit too far, too fast in their upsurge over the past month.

From Jan. 22 through Friday’s close, the Dow Jones industrial average shot up 195.42 points, or 13%. Since last Sept. 20, it has risen more than 400 points.

Traders Still Leery

At midday, the Dow index staged a brief advance into the low 1,700s. The improvement coincided with renewed declines in open-market interest rates.

But brokers said many traders were still leery of chasing after stocks above 1,700 in the Dow.

Eastern Airlines climbed 1 1/2 to 7 7/8 and led the active list on volume of more than 6 million shares. The company said it had agreed to be acquired by Texas Air. Texas Air, which is traded on the American Stock Exchange, gained 2 3/4 to 19 3/4.

After the close, Texas Air said the agreement called for $10 in cash and debt securities to be paid for each Eastern share.

In the blue-chip sector, General Electric dropped 3/4 to 77. The three utilities that owned the canceled Zimmer nuclear power project in Ohio filed a suit contending that GE concealed evidence of design flaws in part of a reactor. GE called the action an attempt to shift blame for the project’s problems and said it believed the suit to be without merit.

FMC Corp. rose 1 7/8 to 87 1/2. The company announced a recapitalization plan calling for the exchange of $70 in cash and one share of new stock for each existing share of stock in public hands.

Auto issues declined after a Wall Street Journal article discussed “underlying softness” in the sales outlook for domestic car makers. Chrysler lost 7/8 to 57 5/8, General Motors 1 to 79 3/8 and Ford 3/8 to 71.

Bond Prices Climb

In the credit markets, bond prices rose and long-term interest rates fell in what analysts attributed to fresh speculation that the Federal Reserve Board would act to ease credit conditions.

Prices on the Treasury’s bellwether 30-year bond rose nearly $7.50 for every $1,000 in face value, and the yield on maturity fell to 8.63% from 8.70% on Friday.

“I think we’re continuing to have an overwhelming bullish tone to the market,” said Harold Nathan, senior financial economist at Wells Fargo & Co. in San Francisco. “One begins to wonder when there’s going to be a correction.”

Analysts said rumors circulated early in the trading session that the Fed might move to ease the discount rate, the fee charged on loans to member banks, which has stood at 7.5% since May. That type of speculation is a major factor behind the prolonged rallies in the bond and stock markets.

“The tone of the market is such that any good news is rapidly built in and any negative news is discounted,” Nathan said.

Among tax-exempt municipal bonds, general obligations rose 3/8 point and revenue bonds were up 1/4 point. Trading was light