Stock prices closed down slightly today but remained near the high of the year that they reached Wednesday.
Marvin Katz, acting chief of the trading desk at Sanford C. Berstein & Co., said today's 3.84-point decline in the Dow Jones Industrial Average to 931.48 came about mainly because traders took profits (largely in oil stocks) and because stock traders are concerned over this week's rise in short-term interest rates.
Lawrence A. Kudlow, chief economist for the brokerage firm Bear Stearns, said the rise in interest rates (some short-term rates have risen a percentage point or more) was caused by the Federal Reserve Board's moves to drain about $4 billion from the banking system in an effort to control the growth of loans and money.
However, Kudlow said the central bank's actions have ensured that money growth is within sight of the targets the Fed has set for the year and its actions will help reduce inflationary expectations and promote a decline in interest rates and a rally in the bond market in the coming weeks.
Bond prices, which declined sharply early today, recouped most of their losses by the end of trading.
Although the Dow average of 30 industrial stocks is 4.7 points below its year-high Wednesday close, the average is 13.39 points higher than it was at the end of last week.
Even though the Dow average -- the most widely used gauge of stock market behavior -- closed down today, more stocks gained in price (774) than fell (764), according to composite figures. About 53.8 million shares changed hands today compared with 62.5 million on Thursday.
The American Stock Exchange market value index was down 0.77 point to 313.72, as 320 stocks gained in price while 268 fell.
After toying with the 900 barrier several times this year, the Dow Jones average crashed through several weeks ago. Most analysts, including Katz, will continue to rally -- with day-to-day ups and downs -- and push through 950 soon.
A big decline in stock prices Thursday reversed itself during the final hour of trading when investment strategists at Merrill Lynch, Pierce, Fenner & Smith, the world's largest brokerage firm, said they were recommending stocks as a long-term investment for the first time since 1976.
Associated Press reported the following:
Oil issues, weak for two sessions on reports of price cuts, stabilized today. Exxon was up 5/8 to 70 1/4, but Standard of California was down 1 to 73 1/2, and Mobil lost 1 1/8 to 73 1/8.
Airlines, which suffered as fuel prices rose, were strong. UAL rose 1/2 to 23, Eastern Airlines was up 1/2 to 11 1/2 and Trans World rose 1 to 19 1/2.
Interest rates continued to edge up in the bond markets, and Citibank raised the rate it charges on loans to brokers from 10 to 10 1/2 percent. Utility stocks continued to suffer, with Middle South Utilities down 1/4 to 12 3/8 and American Telephone & Telegraph losing 1/2 to 51 3/4.
At the American Stock Exchange, Resorts International class A stock fell 1 3/4 to 34 3/8 after the company reported lower second-quarter earnings.
Dome Petroleum said it will drill a substitute well in Canada's Beaufort Sea because of danger from a high-pressure water zone in the original well. It rose 1/2 to 74 3/8.
Huyck Corp. climbed 3 5/8 to 24 1/2 on the NYSE. BTR Inc., a British firm, offered $25.125 for Huyck shares in a takeover move. Wheelabrator-Frye dropped a lower offer for Huyck and rose 1 3/4 to 44 1/2.