Stocks Mixed Again; Dow Up 10.96 : Late Rebound by Blue Chips Pushes Average to 1,778.54

A late rally in blue chips enabled the stock market to finish mixed for the second straight session Tuesday as Wall Street continued its struggle to recover from last week’s selloff.

Trading dwindled to its slowest pace so far this month.

The Dow Jones average of 30 industrials, down almost 20 points in early trading, closed with a 10.96 gain at 1,778.54. Most other market measures posted losses.

Volume on the New York Stock Exchange came to 131.18 million shares, compared to 155.62 million Monday.

So far this week, the Dow Jones industrial average has risen 19.82 points, after taking a record 141.03-point drubbing last week, while the general market has remained on the defensive.

Analysts say some investors may have moved money into the blue chips that make up the Dow in a sort of “flight to quality” after sharp declines of late in many stock prices.

The market showed losses across the board at the outset Tuesday amid fears that last week’s record-breaking selloff might still have further to go.

But bond prices were mixed in relatively quiet trading, as investors cautiously viewed government figures on industrial production for the last three months.

Analysts said the government’s report Tuesday morning on industrial production left investors uncertain about the state of the economy.

The 0.1% rise in industrial output reported by the Federal Reserve Board for August was smaller than expected. But the figures for June and July, which had originally shown declines, were revised sharply upward.

Japanese issues were prominent losers after the Tokyo stock market took a big spill. Honda Motor fell 6 7/8 to 76 1/2; Matsushita Electric 6 5/8 to 96 7/8, and Hitachi 4 1/8 to 60.

BankAmerica dropped 1/2 to 11 3/4 in active trading. The company said rumors in Europe that it faced new financial problems were “preposterous, irresponsible and absolutely groundless.”

Viacom International jumped 5 1/8 points to 40 3/8 and led the active list on turnover of more than 5.75 million shares. The company said it received a buyout offer from a group led by its top management.

Allegheny International, discussed as a possible candidate for a takeover, rose 1 5/8 to 20 1/2.

Greyhound Corp. gained 2 3/8 to 29 7/8. The company said its directors gave management authority to buy back as many as 6 million of the outstanding shares.

In the overall tally on the Big Board, declining issues outnumbered advances by about 7 to 5. The exchange’s composite index lost .17 to 133.21.

Large blocks of 10,000 or more shares traded on the NYSE totaled 2,552, compared to 2,512.

Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 153.25 million shares.

Standard & Poor’s index of 400 industrials fell 0.27 to 256.85, and S&P;’s 500-stock composite index was down 0.22 at 231.72.

In the credit markets, shorter-term interest rates fell slightly, and long-term bond rates edged higher. The bellwether 30-year Treasury bond, off more than 1/2 point at midday, closed 3/16 of a point lower to yield 7.66%, compared to 7.64% late Monday.

The Fed’s industrial production report moved the bond market.

Bond prices were down in early trading because of poor performances in overseas markets, according to Raymond Stone, manager of financial economics for the investment firm Merrill Lynch.

But bond prices rose after the Fed’s release of the industrial production figures, which showed smaller August growth than many analysts had expected.

In the secondary market for Treasury bonds, prices of short-term government bonds rose from 1/32 to 1/16 point, intermediate maturities rose by up to 3/32 point and 20-year issues were off about point.

In corporate trading, industrials rose 1/8 and utilities rose in light to moderate trading.