Dow Up 8.07; Traders Grow More Confident

Stock prices rose today, extending Tuesday’s gain in a quiet session marked by takeover deals and increased confidence about the outlook for interest rates.

The Dow Jones industrial average rose 8.07 points to 2,319.65. Advances led declines by a 4-3 margin in active New York Stock Exchange trading of about 166 million shares.

“Some buying was induced by the Dow closing above 2,310 Tuesday, but there was no aggressive trading either way prior to the economic data due out Friday,” said Daiwa senior trader Ned Collins.

Analysts said hopes seemed to be building that the market would get some favorable news on inflation when the government reports Friday on the producer price index of finished goods for March.

Wall Street estimates call for the index to show a rise of about 0.5%, down from 1% in both January and February.

That would come as at least a tentative signal that the Federal Reserve was seeing some results in its efforts to keep inflation in check.

Producer prices are a gauge of inflationary pressures, which can determine the direction of interest rates. Inflation also lowers the value of such fixed-income securities as bonds.

On the other hand, brokers says that if progress remains slow in the anti-inflation campaign, fears could mount that the Fed might wind up pushing the economy into a recession with its credit-tightening.

Among deals affecting the market were the merger of SmithKline Beckman and Britain’s Beecham Group and Hewlett-Packard’s $476-million deal to buy Apollo Computer.

Bond prices fell slightly in subdued early trading today.

The Treasury’s bellwether 30-year issue was off 9/32 point, or nearly $3 per $1,000 in face amount. Its yield, which moves in the opposite direction from its price, rose to 9.12% from 9.09% late Tuesday.

The federal funds rate, the interest on overnight loans between banks, was trading at 9 3/4%, unchanged from late Tuesday.