Bonds, Stocks Mixed Despite Fed Restraint

Stocks and bonds finished mixed for a second consecutive session, mostly unmoved by the Federal Reserve Board’s decision not to raise short-term interest rates again.

On Wall Street, the Dow Jones industrials rose 22.02 points to 3,674.50, but that was largely because of big moves in a few stocks.

The broad market finished flat; the Standard & Poor’s 500 index eased 0.24 point to 446.13, and losing stocks narrowly outnumbered rising issues on the New York Stock Exchange.

In the bond market, short-term yields slid after the Fed ended its policy meeting without taking action. The yield on three-month Treasury bills dropped to 4.35% from 4.42% at Tuesday’s auction.

But longer-term yields were mostly unchanged. The yield on the 30-year T-bond edged up to 7.59% from 7.58% Tuesday.

Some analysts said they were surprised by the bond market’s indifference to the Fed’s apparent decision to keep monetary policy unchanged for the next six weeks.

Since the dollar began to slide in late June, Wall Street has feared that the Fed would feel compelled to raise short-term rates again, to defend the currency. Those fears have helped push the yield on the one-year T-bill, for example, to 5.42% now from 5.23% on June 23.

The fact that most bond yields held steady on Wednesday, after the Fed ended its meeting, suggested to some analysts that the market remains wary about Friday’s June employment report.

If the employment report is stronger than expected it could encourage the Fed to tighten credit for economic reasons, not to help the dollar.

On Wednesday, the dollar rallied from a 14-month low against the German mark after a spokesman for French Prime Minister Edouard Balladur said monetary issues would be a main topic at the Group of Seven summit this weekend.

The dollar ended at 1.575 German marks in New York after dropping to 1.565 marks, lowest since late-April 1993. But Wednesday’s close still was lower than the 1.580 marks at Tuesday’s close.

The dollar also eased 98.85 Japanese yen, just below Tuesday’s close of 98.90.

In commodity markets prices overall were lower again. Oil prices fell on profit-taking as the market appeared to downplay recent concerns about supply interruptions in Yemen and Nigeria.

August crude oil futures dropped 38 cents a barrel to $19.24 at the New York Merc.

Among Wednesday’s stock market highlights:

* The Dow got a lift as bargain-hunters bid Caterpillar up 2 3/4 to 104 1/2; Alcoa, up 1 1/8 to 77; International Paper, up 1 3/4 to 68 3/4, and Texaco, which gained 1 5/8 to 62 1/2 in reaction to Tuesday’s report of new cost-cutting plans.

* On the downside, Dime Bancorp of New York tumbled 1 3/8 to 9 1/4 after agreeing to merge with Anchor Bancorp to create the nation’s fourth-largest savings bank, with $20 billion in assets. Anchor fell 7/16 to 15 1/2.

* Investors also continued to punish computer networker Wellfleet Communications, which on Tuesday agreed to buy SynOptics, another networker. Wellfleet shares slumped 7/8 to 19 3/16.

* Earnings reports and previews took a toll on the market. Amway Asia Pacific lost 7 1/4 to 26 7/8 after reporting lower quarterly earnings.

Telecommunications equipment maker Summa Four plunged 10 1/4 to 11 3/4 after saying quarterly earnings won’t meet expectations.

Also, brokerage Salomon fell 2 to 45 1/2 after previewing its second-quarter results, which will amount to a large loss.

Overseas, Tokyo stocks ended with moderate losses. The Nikkei index closed off 205.34 points at 20,629.03.

Frankfurt’s DAX average ended up 3.01 points at 2,035.70, while London’s FTSE-100 slid 18.3 points to 2,946.7.

Hong Kong’s Hang Seng index slumped 168.27 points to 8,454.92, lowest since May 9.