STOCKS : Trading Slows Before Holiday; Dow Up 14.31

Blue chip stocks posted gains for a second-straight session Tuesday, but the overall market ended mixed to slightly lower in moderate trading.

Trading volume slowed before the Independence Day holiday Thursday.

The Dow Jones industrial average rose 14.31 points to 2,972.72, adding to a sharp 51.66-point advance in the 30-share index on Monday.

But in the broader market, losers were nearly even with gainers on the New York Stock Exchange--772 issues rose and 757 fell.

Big Board volume was light at 157.18 million shares as of 4 p.m., down from 167.64 million in the previous session. Analysts attributed the low volume to the July 4 holiday. Many professional traders have taken the week off.

Stocks soared Monday on fresh evidence that the economy was recovering. The market also got a boost from a discount rate cut in Japan that sent shares soaring in Tokyo. Japanese stocks then lost ground Tuesday.

Although the approach of a holiday often offers seasonal strength to stocks, some analysts say the market may be running out of steam.

“I think we’re in the trading range we’ve been in for the past five months,” said Kenneth Gerbino, who heads an investment firm bearing his name.

“The economic recovery has already been discounted. That’s why the market couldn’t get above 3,000,” he added. Barring a change in monetary policy, the range could hold, he added.

Among the market highlights:

* Shares of Tenneco dropped 4 3/8 to 35 1/2. C. J. Lawrence lowered its rating and 1991 earnings estimate on the integrated oil and gas company.

* Walt Disney jumped 5 1/8 to 118 7/8. Dean Witter repeated a buy rating on the entertainment firm.

* Intel Corp. was the most active over-the-counter issue, losing 2 5/8 to 42 7/8. Donaldson, Lufkin & Jenrette Securities cut its rating on the computer chip maker, citing concerns about demand for its 386 microchip, used in personal computers.

* Another technology firm, Wyle Labs, traded on the Big Board, lost 2 1/8 to 11 1/2 after it forecast weak second-quarter earnings. Prudential Securities lowered its estimates.

Stocks closed lower in Frankfurt and Tokyo, but ended higher in London.

German shares closed down 0.9%, but prices steadied after an initial decline and the 30-share DAX average held clearly above 1,600. The DAX closed 14.70 points lower at 1,610.50.

Tokyo stocks closed moderately easier in a slight correction after Monday’s 818-point leap. The 225-share Nikkei average slipped 113 points to 23,995.76.

British shares closed higher, with a sprint in the last hour. The Financial Times 100-share average closed 16.6 points higher at 2,460.2.

Credit

Bond prices ended mostly unchanged after wavering in reaction to the latest sign that the economy is recovering.

The Treasury’s bellwether 30-year bond was unchanged from late Monday as its yield held at 8.43%. Most shorter-term securities closed slightly lower.

The long bond initially fell as much as 1/8 point after the Commerce Department reported that orders to U.S. factories jumped 2.9% in May, the second-straight increase after five months of declines.

Analysts said the gain was higher than the 2% improvement predicted by analysts and further confirmed their belief that the manufacturing economy was emerging from its recession.

Traders also sold bonds in response to a report that a University of Michigan survey of consumers indicated a bullish economic sentiment in June. The university would not confirm the report and said the findings would not be released for about a month.

The string of upbeat news lowered expectations that the Federal Reserve will lower interest rates to stimulate economic growth and hurt bond prices. Lower interest rates generally boost the value of government securities.

However, some traders grew bullish after re-examining the inventory findings in the Commerce Department report. The government reported that inventories declined, down 0.8% for the fifth drop in six months.

“People expecting a stronger-than-mediocre-type recovery are expecting inventory accumulation to begin,” said Steven R. Ricchiuto, chief economist for Barclays de Zoete Wedd Government Securities Inc.

The federal funds rate, the interest on overnight loans between banks, fell to 5.75% from late Monday’s 7.50%. The earlier high rate was considered an aberration caused by technical factors.

Currency

The dollar continued its ascent amid the signs that the economy is emerging from recession.

“The dollar just continued to surge up on the belief that things are a heck of a lot more positive than people have been saying,” said Robert Ryan, corporate foreign exchange manager for Bank of New York Co.

The dollar rose in New York to 1.8345 German marks, up from 1.8280 late Monday. It also rose to 138.80 Japanese yen, up from Monday’s 138.42. The British pound fell against the dollar, closing at $1.6025, down from $1.6095 late Monday.

The dollar has surged higher since the first signs of economic improvement began to appear.

Analysts said unrest in Yugoslavia on Tuesday also helped the dollar, which is seen as a safe haven investment in times of political strife overseas. In the Yugoslav republic of Slovenia, the militia battled the federal army with guns, rockets and captured armor.

Other late dollar rates in New York, compared to late Monday’s prices, included: 1.5815 Swiss francs, up from 1.5652; 6.2125 French francs, up from 6.1920; 1,362.75 Italian lire, up from 1,358.00, and 1.14255 Canadian dollars, down from 1.14285.

Commodities

A rally in grain and soybean futures prices stalled on the Chicago Board of Trade after rain fell in some parched areas.

On other commodity markets, meat and livestock futures were mixed; precious metals slipped, and energy futures were mixed.

Wheat futures settled 4 cents to 0.50 cent lower, with the contract for delivery in July at $2.64 a bushel; corn was 2 cents lower to 1.50 cents higher, with July at $2.3275 a bushel; oats were 2.50 cents to 0.75 cent lower, with July at $1.1375 a bushel, and soybeans were 8.25 to 1.25 cents lower, with July at $5.3175 a bushel.

Futures prices gained through mid-session, then plunged to near-contract lows as traders liquidated their positions on word that rain in the Corn Belt might alleviate some pressure on corn and soybeans. The crops are entering a critical growing period.

But prices rallied once more near the close on traders’ perceptions that the rain did not provide enough water to relieve the crops and on the belief that weather is too unpredictable to dump all interests in the futures.

On New York’s Commodity Exchange, precious metals were lower with gold settling 80 to 30 cents lower, with July at $367.90 an ounce; silver settled 3.3 to 3.1 cents lower, with July at $4.408 an ounce.

Energy futures on the New York Mercantile Exchange were mixed in light trading. Unleaded gasoline and crude oil futures gained in advance of U.S. oil inventory figures, which are expected to show strong demand before the holiday.

Light, sweet crude settled 2 to 6 cents higher, with August at $20.82 a barrel.

Market Roundup, D6