Dow Dips 5.39; Investor Fears Nip Early Rally : Rise in Interest Rates Depresses Stocks, Bonds

The stock market declined slightly Monday, giving up an early gain as interest rates resumed their recent rise.

Trading set its slowest pace in five weeks.

The Dow Jones index of 30 industrials, up more than 12 points in the early going, closed with a 5.39-point loss at 2,270.60.

Volume on the New York Stock Exchange came to 139.07 million shares, down from 189.57 million on Thursday and the lightest total since a 134.93-million-share day on March 16.

Trading had been expected to be quiet after the Easter holiday weekend, and analysts said many investors were in a cautious mood.

Both the stock and bond markets were closed Friday in observance of Good Friday.

A recent rise in interest rates threw a scare into the stock market, raising questions about the outlook for the economy and Federal Reserve policy.

In Monday’s credit market activity, the Treasury’s 30-year bond, which had gained about 3/4 point on Thursday, was off nearly 2 points, or $20 per $1,000 face amount, in late trading. That pushed its yield to 8.39%, up from Thursday’s 8.21%.

Declining issues outnumbered advances by about seven to five in the overall tally on the NYSE. The exchange’s composite index of all its listed common stocks dipped 0.40 to 162.19.

Large blocks of 10,000 or more shares traded on the NYSE totaled 2,510, compared to 3,509 on Thursday.

In the secondary market for Treasury bonds, prices of short-term governments fell between 11/32 and 9/16, intermediate maturities ranged from 23/32 point to about 11/32 point lower and 20-year issues were down about 2 points, according to figures provided by the investment firm 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.

But the federal funds rate, the interest on overnight loans between banks, remained unchanged from Thursday at 6.125%.