The stock market, despite positive economic news on several fronts, finished a sluggish session today with only slight gains as the Dow Jones Industrial Average gained 6 points.
Analysts noted that Federal Reserve Board Chairman Paul Volcker, in congressional testimony today, indicated that further sharp increases in interest rates are not likely, a positive sign for stocks. The market has been hurt for more than a week by fears that the Federal Reserve was moving to tighten rates to keep economic growth later this year from escalating too rapidly.
But even the reassurance from Volcker, plus a solid second-quarter report from widely-traded International Business Machines Corp. and positive news from Ford Motor Co., were not enough to push the stocks sharply higher. Ford announced it would pay a 30-cent dividend in the third quarter, its first quarterly dividend since the final three months of 1981.
Lew Smith, market analyst at Bear, Stearns & Co., said Volcker's testimony was read as "neutral or positive" by most investors, but called the market's gain "a very soft rally.
"Even with good news providing a temporary quick shot in the arm, most stocks aren't performing well," Smith said. "Despite this very good news and well-spaced events during the day, it was a very feeble rally try. The market lacks any real mustard on its rallies."
Describing Volcker's testimony as a "statesmanlike job of saying absolutely nothing," Michael Metz, analyst at Oppenheimer & Co. Inc., said the market perhaps for as long as the rest of the summer will be the victim of a major change in investment strategy, one stemming from the fact that investments like bonds and treasury notes are looking better than stocks.
"A reluctance to buy will characterize the market for the next few weeks," Metz said. "There's been a change in psychology in that people see good news as a chance to sell rather than to buy."
The bond market was generally slightly higher today, with both federal and municipal bond prices up slightly, after posting higher gains during the early hours of trading. Twenty-year Treasury long-term bonds, for instance, were up almost a half point early in the day only to close trading up a quarter point.
Trading was more erratic in stocks during today's session with the the Dow industrials, at one point, down 7 points and at a later point up over 12 points, before closing as 1,204.33, a gain of 6 1/2 points. The Standard & Poor 500 was up 0.55 closing at 155.01, while the S&P 400 industrials were up 0.62, clsing at 187.10.
Volume on the New York stock exchange totaled 83.5 million shares, relatively heavy for a summer session, and up from yesterday's figure of 68.9 million shares. Advancing stocks led declining ones by a 925 to 631 tally. The New York composite index rose 0.33 to 96.23 and the average price share was up 12 cents.
Among widely traded issues, IBM rose 0.75 point to close at 122, American Telephone & Telegraph rose a half point closing at 63, Ford Motor was up 2 3/8 to 58 1/4, Chrysler up 1 3/8 to 32 3/8, and General Motors was up 1 3/8 closing at 72 1/8.
On the American Stock Exchange, volume was up slightly to 7.56 million shares from yesterday's total of 7.3 million shares as the Amex index rose 1.81, closing at 242.88. With 326 stocks rising and 272 declining, the average price share rose 14 cents.