Jitters Over Interest Rates Keep Stocks Steady; Dow Up 1.78

Stocks closed slightly higher in Wall Street trading Monday, but the market showed little conviction because of concerns over the direction of interest rates, traders and market analysts said.

The Dow Jones index of 30 industrials inched up 1.78 to close at 2,130.51.

“There was a real malaise today,” said chief investment strategist Hugh Johnson of First Albany Corp.

The thinness of trading and the shallowness of the market’s breadth were both symptoms of this caution, market analysts said. New York Stock Exchange volume totaled 138.17 million shares, down from Friday’s 192.34 million.

Wall Street stocks began the day’s session lower, as profit taking whittled away the sharp gains made last week. The Dow gained 67.74 points last week, mostly on Thursday and Friday. Analysts said recent strength of the transportation index, which Monday posted a solid 5.08-point gain to close at 891.28, has aided the market’s advance.

Brokers said investors also showed caution in light of last week’s advance.

“There’s a lot of caution when people approach the 2,150 level. Once we start to get a little bit overvalued, investors don’t want to jump on board with the same reckless abandon they showed before the crash,” Johnson said.

Holding Its Ground

Nevertheless, some market analysts read Monday’s trading as a pause before the market moves higher again. “We’re just consolidating. I think it was decent action considering the market advanced over 60 last week,” said trader Rod Anderson of Shearson Lehman Hutton Inc.

Some traders were encouraged that the market held its ground. “The market is holding rather tenaciously to (last week’s) gain,” noted Michael Metz, vice president and technical analyst at Oppenheimer & Co. “It is absorbing profit taking with relative ease.”

A stronger bond market and a rise in the Dow’s key transportation sector helped support equities.

But other observers, pointing to anemic volume and a lack of a conviction, were not so satisfied.

“All last week’s rally did was recover losses from the prior week,” said Eugene Peroni, a technical analyst at Janney Montgomery Scott Inc. in Philadelphia. He noted that stocks moved to “the upper end of their trading range and then ran out of momentum.”

Those who appeared pleased with the day’s events said they would have been far more concerned had the market’s upward move resumed at a brisk pace.

“What you don’t want to see is instant euphoria,” said Larry Wachtel, first vice president at Prudential-Bache Securities Inc.

Some analysts said trading should continue to be tentative as the market awaits important economic data, such as this morning’s leading indicators for June, and the July employment figures, due Friday.

Gillette Declines

Both, they said, could have important implications for interest rates, especially if they reveal that the economy is continuing to grow at a brisk pace. The markets have been nervous about high levels of growth, fearing that it would fan inflation and force the Federal Reserve to push up rates in reaction.

A measured approach to the market could mean better things down the road. “That’s the kind of action you get prior to a trend resuming,” Wachtel said.

Among actively traded Big Board issues, Gillette was down 2 5/8 at 37 1/2. the razor-blade maker reached a stand-still agreement in its legal dispute with Coniston Partners and said it will buy back 16 million shares for $45 each.

Boeing, which reported higher quarterly earnings, was up 1 7/8 at 62 3/8. Armtek jumped 4 to 42 5/8. Mark IV Industries, which holds 14.9% of Armtek, intends to offer $40-a-share for the company.

Central & South West, the most active NYSE issue with 19.7 million shares changing hands, was up 1/8 at 31 1/2. Traders were interested in capturing the company’s dividend.

Elsewhere, IBM was up 1/2 at 126, American Express was up 1 at 29 1/8 and Exxon fell 5/8 to 44 3/4.

Advancing issues outnumbered declines by about 11 to 9 in nationwide trading of NYSE-listed stocks.

The Wilshire index of 5,000 equities closed at 2,705.478, up 3.246.

The NYSE composite index rose 0.17 to 153.52.

Standard & Poor’s index of 400 industrials fell 0.03 to 313.95, while S&P;’s 500-stock composite index rose 0.19 to 271.21.

The American Stock Exchange market-value index rose 0.53 to 306.71; the NASDAQ composite index closed at 388.00, up 0.67.

In Tokyo, the Nikkei 225-share index, a 288.31-point winner during Saturday’s half-day session, added 126.37 to close at 28,326.31, its second-highest finish ever.

Share prices on the London Stock Exchange closed higher but off from the day’s peak in the wake of advances in New York and Tokyo.

The Financial Times 100-share index closed up 8.6 at 1,862.2.

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