Stocks Rise, but Yield Most of Gain : Dow Finishes Day Up 2.96; Bond Markets Are Skittish

The stock market settled for a small gain Wednesday at the close of an erratic session.

The Dow Jones average of 30 industrials, up more than 14 points at its best level of the day, finished with a 2.96 advance at 2,226.24.

The bond market, meanwhile, shrugged off the positive effect of falling oil prices, wiping out its early gains to finish mostly lower in generally light, skittish trading.

Volume on the New York Stock Exchange totaled 184.14 million shares, up from 151.31 million in the previous session.

Analysts said the market got a boost at mid-morning when stock-index futures rose, encouraging professionals engaged in program trading to sell the futures and buy stocks that are prominent components of the market indexes. Otherwise, they said, the atmosphere was generally subdued.

‘Tough to Figure Out’

“This is a tough market to figure out,” trader John Burnett of Donaldson, Lufkin & Jenrette Securities said. “It acted extremely well this morning, but as soon as programs came in, we ran into problems.”

Some analysts said that traders were holding back on commitments awaiting today’s release of the Tower Commission’s report on the Iran- contra arms scandal.

Brokers noted that the market’s runaway rally at the start of the year had lately shown signs of losing momentum, with trading volume slackening and prices leveling off. In these circumstances, they said, it was natural for investors to cash in some of their gains.

Pharmaceutical issues, which have been strong lately, chalked up more gains. Merck rose 2 3/4 to 155 1/8, Squibb advanced 4 to 155 1/2, Schering-Plough gained 2 7/8 to 97, Eli Lilly rose 1 to 94, Pfizer added 1 to 73 3/4, Syntex picked up 1 7/8 to 81 and Upjohn added 2 3/4 to 134 3/4.

The group has been aided by a declining dollar, enthusiasm over some new products in the industry and positive earnings reports of late.

Bank Stocks Decline

Bank stocks, by contrast, came under pressure again in response to worries about less developed countries’ debts. Citicorp dropped 1 to 52 3/4, Chase Manhattan fell 7/8 to 38, Chemical New York lost 3/4 to 46 1/8, and Manufacturers Hanover slipped 1 1/8 to 45.

The NASDAQ composite index of over-the-counter issues jumped 3.62 to a record 421.01. At the American Stock Exchange, the market value index closed at 318.53, up 1.18.

Large blocks of 10,000 or more shares traded on the NYSE totaled 3,514, compared to 2,849.

In the bond market, the Treasury’s closely watched 30-year issue fell 3/8 point, or $3.75 per $1,000 face value. That boosted its yield to 7.52% from 7.49% late Tuesday. Corporate and municipal bonds were unchanged to lower.

Analysts said bond prices were buoyed early in the trading day by weak oil prices and a decline in key short-term interest rates.

Federal Funds Rate

The bond market also got an early lift from a lower federal funds rate, the interest on overnight loans between banks. It was quoted late in the day at 5 1/2%, down from 5.938% late Tuesday, after opening at 5 7/8%.

The federal funds rate is closely watched by bond traders as an indication of the Federal Reserve’s credit policies. Bond prices and interest rates move in opposite directions.

But the market’s advance stalled after midday, dealers said, as substantial selling pressure came in and pushed bond prices lower.

“It was basically a disappointment,” said William Sullivan, director of money-market research for Dean Witter Reynolds Inc. “Overall, the market failed to respond to positive developments.”

Analysts were not sure what caused the reversal. But Sullivan and others suggested that bond investors may be nervous about the Tower Commission report, as well as several key U.S. indicators to be published soon, most notably Friday’s trade figures.

“The market’s been selling off for the last couple of hours,” said Jay Goldinger, an investment broker for Cantor, Fitzgerald & Co. Inc. in Beverly Hills. “I have this feeling that there’s some uncertainty about Reagan.”

Treasuries Mixed

Analysts said the bond market was unmoved by the results of Treasury’s auction Wednesday, where yields on five-year notes rose to the highest level since June.

Meanwhile, yields on three-month Treasury bills fell 3 basis points to 5.46%. Six-month bills were also 3 basis points lower, at 5.42%, and one-year bills were unchanged at 5.59%, according to Salomon Bros. Inc. A basis point is one-hundredth of a percentage point.