Dow Off 3.34 in Cautious Trading : Currency, Credit Markets Provide Steadying Influence

The stock market showed no clear trend Monday in a cautious response to new signs of a stabilizing dollar and falling interest rates.

The Dow Jones average of 30 industrials, up more than 10 points at its best level of the day, closed with a 3.34-point loss at 2,288.23.

Volume on the New York Stock Exchange came to 149.34 million shares, against 153.50 million in the previous session.

Analysts said the currency and credit markets have generally worked in the market’s favor lately.

With the dollar having steadied against leading foreign currencies of late, interest rates have turned downward, halting a rise that began in early spring.

On Monday the Treasury’s bellwether 30-year issue, which was up about 3/4 point, or $7.50 per $1,000 face amount on Friday, ended the day up 3/8 point, or $3.75. Its yield eased to 8.61% from 8.65% in the previous session.

Another apparent plus for the stock market was a Wall Street Journal report that Paul A. Volcker is likely to be reappointed as chairman of the Federal Reserve after his current term expires in August, provided that he wants to continue in the job.

However, brokers said, the White House has made no official decision, and the possibility remains that Volcker might not want to take on a third four-year term at the Fed.

Wall Streeters generally hold Volcker in high regard, and fear that a change of leadership at the central bank might lead to at least a short period of turbulence in the markets.

Analysts also noted that volume of stock trading has been sluggish lately, suggesting a persistent mood of uncertainty among market participants.

Losers among the blue chips included DuPont, down 1 1/2 at 111; Eastman Kodak, off 1 5/8 at 78 1/8; International Business Machines, down 3/8 at 159 5/8, and General Electric, 5/8 lower at 51 3/8.

Uccel, which agreed to be acquired by Computer Associates in an exchange of stock, jumped 11 5/8 to 43 5/8, posting the day’s biggest percentage gain among NYSE issues. Computer Associates slipped 7/8 to 27 1/8.

Hospital Corp. of America rose 1 to 48. The company approved a plan to sell more than 100 general hospitals to an employee group.

Circus Circus Enterprises picked up 1 3/8 to 26 7/8. The company reported that its earnings for the fiscal quarter ended April 30 came to 37 cents a share, up from 23 cents in the comparable period a year earlier.

Advancing issues outnumbered declines by about nine to eight on the NYSE.

Large blocks of 10,000 or more shares traded on the NYSE totaled 2,842 down from 3,085 Friday.

In the credit markets, the stabilizing dollar and renewed buying interest from Japanese investors helped push bond prices modestly higher on Monday.

Corporate and municipal bonds posted slight gains. Yields on Treasury bills were mostly higher.

“It’s clearly the strength of the dollar that’s propelling the market,” said William V. Sullivan, director of money market research for the investment firm Dean Witter Reynolds.

Analysts said bond investors are optimistic that next week’s summit meeting of major Western industrial nations would produce renewed commitment for currency stabilization.

A rise in the dollar is often perceived as a boost to the credit markets because it’s seen as a curb against higher inflation and makes dollar-denominated fixed securities, such as bonds and notes, more attractive to foreign investors.

Besides the dollar, increased Japanese buying activity also pushed bond prices higher Monday, analysts said.

David Hale, chief economist for Kemper Financial Services, said the Japanese have become attracted to the higher yields of U.S. bonds. Yields have risen sharply in recent weeks as bond prices plummeted, mostly due to a weak dollar and higher commodity prices.

In the secondary market for Treasury bonds, prices of short-term governments were unchanged to 1/16 point higher, intermediate maturities ranged 1/16 point to point higher and 20-year issues were up 3/16 point, according to 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.

Among tax-exempt municipal bonds, general obligations rose 1/8 point and revenue bonds were up 3/8 point. Trading was light.

The federal funds rate, the interest on overnight loans between banks, traded at 6.688%, up from 6.563% Friday.