NEW YORK — Stock prices edged up Thursday in uncertain trading following reports from Washington that the economy grew at an unexpectedly weak rate of 2.1% during the first three months of the year while inflation heated up.
While stocks were only modestly higher, bond prices rose sharply and most short-term interest rates fell following the report of sluggish economic growth and a decline in the nation's money supply.
Drug, retail and financial-service stocks were mostly up. Airlines, farm equipment, oil and oil service stocks were mostly down.
The Dow Jones average of 30 industrials rose 2.98 points to 1,268.22.
Gainers barely outpaced losers on the New York Stock Exchange.
Big Board volume totaled 95.93 million shares, against 107.53 million on Wednesday.
A slowing economy is both good and bad news on Wall Street. While it could bring relief from high interest rates, it also could reduce corporate profits.
A higher rate of inflation, meanwhile, could ignite fears that the Federal Reserve Board might tighten its grip on the money supply, which would push interest rates up.
The Federal Reserve, meanwhile, said the nation's basic money supply fell an unexpected $2.1 billion in the week ended March 11. Most credit analysts had looked for an increase of about $500 million.
Both reports fueled expectations that the Federal Reserve's policy-making arm, which meets next Tuesday, would avoid voting for tighter credit conditions, a move that would lift interest rates.
"The stock market is trying to absorb all this," said Larry Wachtel of Prudential-Bache Securities.
Richard Schmidt of Advest said: "It hasn't been able to sustain much of a direction either way."
Among actively traded issues, GTE was down 1 5/8 at 41 3/8.
The company released a study concluding that federal communications regulation must change if true competition in the long-distance telephone market is to flourish.
"The prospects for competition in the long-distance market are in severe jeopardy," said Edward C. Schmults, GTE senior vice president and general counsel who spoke to reporters gathered in New York and Washington.
CBS, the target of takeover speculation, was down 5/8 at 105 5/8. The company issued a statement Thursday saying that it has "no plans in place or contemplated for a management group to implement a leveraged buy-out of the company."
Large blocks of 10,000 or more shares traded on the NYSE totaled 1,835, compared to 2,217.
In the money markets, yields on three-month Treasury bills dropped 12 basis points to 8.40%. Six-month bills fell 14 basis points to 8.78% and one-year bills skidded 18 basis points at 8.95%. A basis point is one-hundredth of a percentage point.
Yields on 30-year Treasury bonds fell to 11.72% from 11.82% on Wednesday.
The federal funds rate, the interest on overnight loans between banks, inched up to 8.688% from 8.675% on Wednesday.
In the secondary market for Treasury bonds, prices of short-term governments rose 16/32 point, intermediate maturities climbed 18/32 point and long-term issues jumped 24/32 point, according to the investment firm of Salomon Bros. Inc.
In corporate trading, industrials and utilities rose 1/2 point in light trading, while in the tax-exempt municipal bond market, general obligations and revenue bonds climbed 3/8 point in moderate trading, according to Salomon Bros.