FINANCIAL MARKETS : Dow Gains 16; Interest Rates, Big Bids Cited

Stock prices gained ground for the second straight session Wednesday, bolstered by two big takeover bids in the communications industry and a belief that U.S. interest rates are headed lower.

The Dow Jones index of 30 industrials climbed 16.00 to 2,512.32 on top of Tuesday’s 15.62-point rise.

Advancing issues outnumbered declines by about 9 to 5 in nationwide trading of New York Stock Exchange-listed stocks.

Volume on the floor of the Big Board came to 213.71 million shares, up from 187.57 million in the previous session.

Time Inc. soared 44 to 170 after a delayed opening, on word late Tuesday that Paramount Communications was making a $175-a-share cash tender offer for Time, which has been planning to merge with Warner Communications.

Paramount shares rose 3/4 to 54 3/4, and Warner gained 1 3/4 to 53 1/2.

Separately, Lin Broadcasting jumped 26 to 129 1/2 and McCaw Cellular Communications gained 3 3/4 to 47 in the over-the-counter market. McCaw made a $120-a-share offer for Lin.

Those developments prompted speculative buying of other communications stocks. For example, Racal Telecom rose 5 to 81 and Centel picked up 4 1/8 to 53.

Regional telephone stocks also were broadly higher. BellSouth gained 1 3/8 to 51; U.S. West 1 to 71; Nynex 2 5/8 to 82 5/8 and Southwestern Bell 1 to 53 7/8.

Analysts said the overall market also continued to benefit from evidence that the Federal Reserve might have begun to relax its credit policy. The Fed this week has permitted, if not encouraged, a modest decline in the interest rate on federal funds, overnight loans between banks.

Hopes that the central bank has succeeded in its bid to restrain inflation and may now ease credit face a possible test Friday, when the Labor Department issues its monthly report on the producer price index.

Advance estimates call for the index to post an increase of 0.5% or 0.6%, up from 0.4% in April.

Windmere dropped 2 1/8 to 14. The company said its manufacturing and shipping activities in the Far East have been curtailed by the effects of the political turmoil in China.

Windmere shares traded as high as 29 earlier this year before worries about the situation in China started pushing them down.

Stock prices rebounded in slow trading on the Tokyo Stock Exchange Wednesday after four losing sessions shadowed by the turmoil in China. The Nikkei 225-share average gained 174.88 points to close at 33,626.89 yen.

The Financial Times 100-share index gained for the second straight day after five days of losses prompted mainly by fears that sterling’s weakness would force another rise in British interest rates. The 100-share index closed 10.5 points higher at 2,117.9.

Commodities

Copper futures prices rose sharply on New York’s Commodity Exchange on speculation that labor contract negotiations at major U.S. copper producers will be accompanied by strikes.

On other futures markets, precious metals were mixed, grain and soybean prices fell, livestock and meat prices were higher and energy futures declined.

Copper rallied on word that officials of Magma Copper Inc. expected labor contract talks to be difficult and expected a strike.

Copper settled 2.25 cents to 2.45 cents lower with the contract for delivery in June at $1.0885 a pound.

Supply concerns were fueled by reports that Bougainville Copper Ltd.’s supply contracts were delayed by the shutdown of its Papua, New Guinea mine, said John O’Connell, an analyst with Refco Inc. in New York. The mine has been damaged by attacks from native rebel landowners.

O’Connell said the rise in copper prices also could be attributed partly to a comeback from a selloff spurred by the turmoil in China. The nation is a big copper importer and traders reacted to the upheaval there with a big selloff Tuesday due to speculation the troubles would disrupt commerce and industry there.

Credit

Bond prices staged another broad advance, pushing interest rates lower amid optimism that U.S. interest rates have peaked.

The Treasury’s benchmark 30-year bond climbed 29/32 point, or $9 for every $1,000 in face amount. Its yield, which moves in the opposite direction from price, fell to 8.31% from 8.40% late Tuesday.

The 30-year Treasury bond had not closed that low since March, 1988.

The federal funds rate fell to 9.375% on Wednesday from 9.516% late Tuesday.

Currency

The dollar drifted in a narrow range in foreign-exchange trading and gold gave up part of the big gain made late in the previous session.

Republic National Bank of New York said gold was bid at $374 an ounce as of 4 p.m. EDT, down from $376.70 an ounce late Tuesday. Gold had jumped about $12 an ounce in late trading Tuesday.

Gold rose in overseas markets to catch up with the gains made late Tuesday in the New York trading session.

In Hong Kong, gold rose $11.17 an ounce to a bid $376.61. Gold jumped in London to a late bid price of $375.65 from $365.25 In Zurich, the late bid was $374.50, up from $365.30 late Tuesday.

On the Commodity Exchange in New York, gold bullion for current delivery fell to $376.10 an ounce from $379.90 on Tuesday.

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