STOCKS : Market Pulls Back After Big Gain; Dow Up 3

The stock market closed with modest gains Monday, supported by a sharp rebound in the Tokyo stock market, but the market ended far from its peaks as a big fall in gold prices put pressure on stocks. The Dow Jones index of 30 industrials, up about 20 points in the early going, settled for a 3.38-point gain to close at 2,707.66.

Advancing issues outnumbered declines in nationwide trading of New York Stock Exchange-listed stocks, with 826 up, 664 down and 491 unchanged.

The recently battered Tokyo stock market began to rebound on Friday. It surged ahead nearly 5% Monday for its second-largest daily gain.

Analysts said that prompted hopes that turmoil in the Japanese markets might subside without having caused many ripple effects in other financial centers around the world.

At the same time, the dollar continued its recent climb against the Japanese yen in foreign exchange.

The U.S. bond market, which has benefited from the dollar’s strength, extended its recent rally, pushing interest rates lower.

But activity in U.S. stocks set a sluggish pace all day, and as the session progressed, prices failed to hold at their early peaks. Brokers cited worries about unpleasant surprises in forthcoming earnings reports for the first quarter.

Among actively traded blue chips, American Telephone & Telegraph rose 5/8 to 41 3/4 as the company launched its venture into the credit card business; Procter & Gamble gained 7/8 to 68 1/8; Coca-Cola was up 1/4 to 74 3/8, and General Motors added 1 1/8 to 47 1/2.

Tokos Medical of Santa Ana went public at $12 a share Monday and closed at 11 3/4. The company, which provides home health services for detection and treatment of early labor in pregnancy, sold 2 million shares in the offering. Tokos Chief Executive Robert Byrnes said the stock was depressed Monday by additional stock sales by company founders, which he said had been expected.

Precious metals stocks fell as world gold prices took a beating. On the Commodity Exchange in New York, gold for near-term delivery tumbled $23.10 an ounce to $365.80.

Homestake Mining lost 1 5/8 to 17 1/2; Placer Dome fell 1 to 16 7/8; ASA Ltd. dropped 2 3/8 to 51 3/4; Newmont Gold fell 2 7/8 to 46 3/8; Amax Gold slipped 1 to 16, and American Barrick Resources lost 1 7/8 to 17 5/8.

Curtiss-Wright gained 2 1/2 to 61. The company’s new chairman said he had received notice from an unnamed party expressing interest in acquiring Curtiss-Wright.

Big Board volume was a thin 116.11 million shares, down from Friday’s 132.07 million.

Elsewhere, Pasadena-based Jacobs Engineering jumped 1 1/2 to 40 1/2, a new 52-week high.

Prices closed higher on London’s Stock Exchange, boosted by increased institutional activity, program trading and a shortage of blue-chip stocks. Buying in the stock index futures market also helped propel the cash market higher for most of the day, dealers said. At the close, the Financial Times 100-share index was up 14.3 points at 2,298.2.

CREDIT Bonds Pulled Up by Weakness in the Yen Bond prices were higher in quiet trading, buoyed by the dollar’s strength against the Japanese yen.

The U.S. Treasury’s key 30-year bond was up 11/32 point, or $3.40 per $1,000 in face value, by midday EST. Its yield, which moves in the opposite direction from price, slipped to 8.44% from 8.47% late Friday.

Analysts said buying was sparked by the dollar’s persistent upward climb against the yen despite efforts by the Bank of Japan to stem the gains. A stronger dollar increases the value of dollar-denominated assets, such as bonds.

“Good dollar buying overseas pushed us up,” said Mitchell Held, chief financial economist for Smith Barney, Harris Upham & Co. “Other than that, it’s pretty quiet here.”

Credit market observers said the drop in precious metals prices also was helping bond prices. Investors in gold and other important metals generally sell when prices are declining and buy dollar-denominated securities.

In the secondary market for Treasury bonds, prices of short-term governments were up between 1/16 point and 1/8 point at midday, intermediate maturities rose between 3/16 and 9/32 point and long-term issues advanced between 3/8 and 13/32 point, according to Telerate Inc., a financial information service.

The movement of a point equals a change of $10 in the price of a bond with a $1,000 face value.

The federal funds rate, the interest rate banks charge each other on overnight loans, was quoted at 8.25%, unchanged from late Friday.

CURRENCY Soviet Tensions Help Send Dollar Higher The dollar, boosted by political tension in the Soviet Union and expectations of continued weakness in the Japanese yen, finished higher against most major currencies in European trading Monday, then fell in New York.

The dollar has been bid up due to speculation that U.S. interest rates will remain at present levels or higher. There is a perception that the Federal Reserve Board won’t nudge rates down because economic growth appears adequate while inflationary pressures persist.

Tension in the Soviet Union over the Lithuanian independence movement and forecasts of further weakness in the Japanese yen also have driven up the dollar.

Dealers also noted some disappointment that Japan Finance Minister Ryutaro Hashimoto was unable to secure any apparent monetary concessions from U.S. Treasury Secretary Nicholas F. Brady during weekend meetings.

The dollar rose to 156.70 yen in New York from 154.30 yen late Friday. In Tokyo, the dollar rose by 1.33 yen to 156.40 yen Monday, its highest close since Jan. 13, 1987. Later in London, the dollar was quoted at 156.35 yen.

The British pound strengthened to $1.6185 in New York from $1.6010 on Friday. Sterling traded late in London at $1.6135, up from $1.6040 late Friday.

Other late dollar rates in New York, compared to late Friday’s quotes, included: 1.7075 West German marks.