Dow Index Edges Up 3.51 as Profit Taking Cools Rally

The stock market rose modestly today, maintaining the solid gains of a robust rally in the previous two sessions and pushing the Dow Jones industrial average to a new high.

The Dow Jones average of 30 industrials rose 3.51 to 1,974.83.

Gainers outpaced losers by seven to five 5 on the New York Stock Exchange.

Big Board volume totaled 189.30 million shares, against 181.85 million in the previous session.

The NYSE’s composite index rose 0.42 to 144.81.

At the American Stock Exchange, the market-value index was 273.48, up 1.41.

Traders said the market failed to surge strongly ahead today in part because of some profit taking among investors, a weak bond market and the dollar’s poor performance on world currency exchanges.

“Right now, we need something to push the market even further, such as a reduction in interest rates or a (positive) change in the economic outlook,” said Mary Farrell, a stock market analyst for Paine Webber Inc.

When interest rates fall, stocks become a more attractive investment over bonds.

On Monday, the Dow Jones average soared 44.01 to 1,971.32, topping the previous closing high of 1,955.57 set Dec. 2. It also surpassed the previous record one-day point increase of 43.41 points set on Nov. 3, 1982.

In the past two sessions, which also were the first two trading days of 1987, the Dow Jones average rose 75.37 points.

Traders attributed the rally to the end of traditional year-end tax-selling pressures, which were especially acute in 1986 due to changes in the tax law which took effect Jan. 1.

Investors who sold their stocks last year to deduct losses and take advantage of tax benefits for capital gains were now pouring their money back into the stock market, traders said.

Bond prices were little changed in thin early trading today as investors waited for new indications of the economy’s direction.

The Treasury’s key 30-year issue was down 3/32 point, or less than $1.25 for each $1,000 in face value, with its yield rising to 7.34% from 7.33% late Monday.

Prices for corporate and municipal bonds were higher.

Yields on three-month Treasury bills were down 3 basis points to 5.50%. A basis point is one-hundredth of a percentage point. Six-month bills rose 2 basis points to 5.53% and one-year bills were unchanged at 5.53%.

The federal funds rate, the interest on overnight loans between banks, traded at 6 1/2%, down from 6 3/4% late Monday.