Stocks Finish Mixed; Dow Drops Back 7.53 : Bond Traders Breathe a Bit Easier as Japanese Buy Heavily on Last Day of Treasury Auction

Stock prices fluctuated in a narrow range Thursday as traders awaited the outcome of the last stage of the Treasury’s quarterly financing.

The Dow Jones average of 30 industrials, which had climbed 61.79 in the week’s first three sessions, retreated 7.53 to 2,334.66.

Volume on the New York Stock Exchange reached 215.20 million shares, up from 196.56 million Wednesday.

Japanese investors bought heavily Thursday during the third and final day of the Treasury’s quarterly refinancing auction, and traders in already outstanding government issues expressed their relief with a buying spurt of their own.

Weak demand for the U.S. government bond sale would have forced the Treasury to pay a higher interest rate on the securities, which could have pressured interest rates in general to rise further.

The Treasury sold $9.28 billion in 30-year notes out of bids totaling $20.2 billion. The average yield was 8.76%.

On Wednesday, the Treasury sold $9.77 billion in 10-year notes out of bids totaling $20.81 billion. Yields averaged 8.52%.

If buyers--in particular, Japanese investors--were to bid for the bonds in force, observers believed, it might signal a stabilizing dollar in foreign exchange and relief from the recent upward pressure on interest rates.

But a generally lackluster response to sales of three-year and 10-year notes Tuesday and Wednesday raised some doubts about whether Thursday’s offering would follow that script.

On the Big Board, Procter & Gamble gained 3 5/8 to 88 7/8. The company said the Food and Drug Administration will review its petition for approval of a calorie-free substance that serves as a substitute for fats in various food and cooking products.

Losers among the blue chips included International Paper, down 2 1/2 at 93 7/8; Eastman Kodak down 2 1/2 to 81, Minnesota Mining & Manufacturing down 2 to 128 3/4 and IBM, down 3/4 at 164 7/8.

Advancing issues and declines were evenly balanced on the NYSE, with 799 up, 780 down and 385 unchanged.

Before the Treasury bond auction, fears had run high on credit markets that Japanese traders--who had bought substantial amounts in previous auctions of long-term government bonds--would not bid aggressively because of the steep decline of the dollar.

When the dollar is down, foreign investors receive a lower return when their profits are converted into their home currencies.

The market had been down early in the Thursday’s session, dominated by pessimism about the auction. But the Treasury’s outstanding 30-year bond was quoted up 19/32 point late in the day, with its yield at 8.68%, down from 8.74%.

The federal funds rate, the interest on overnight loans between banks, was quoted at 6.813%, up from 6.675% Wednesday.