NEW YORK — The stock market turned upward today, steadying after the selloff of the past two sessions with the help of declining interest rates.
The Dow Jones average of 30 industrials, down 80.14 points Monday and Tuesday, rose 5.34 to 1,826.07.
Advancing issues outnumbered declines by almost two to one on the New York Stock Exchange. Big Board volume totaled 142.88 million shares, against 174.06 million on Tuesday. The NYSE's composite index gained 0.83 to 139.55.
Early in the session and again near the close, stocks benefited from flurries of buying by traders apparently shopping for "bargains" after the market's sharp drop since the start of the week.
This cautious show of support was encouraged by interest rate declines in the credit markets that pushed prices of long-term government bonds up more than $10 for every $1,000 in face value.
But analysts said the stock market was still feeling the affects of the jolt of Monday's record-setting drop and further selling on Tuesday. Furthermore, they said, concern persisted over slower than expected economic growth. Second-quarter earnings reports issued by corporations over the next few weeks are expected to reflect that general sluggishness.
Treasury Issues Recoup Losses
In the credit markets, some actively traded long-term Treasury bonds recouped most of their losses from Tuesday while short-term interest rates receded from the levels recorded late in the previous session.
Gib Clark, chief trader for Daiwa Securities America, said the market's recovery reflected buying by dealers who had sold heavily on Tuesday due to reports that the Federal Reserve might refrain from cutting the discount rate unless its foreign counterparts agreed to reduce their key rates.
"The market has come to the realization today that it overreacted Tuesday," Clark said.
Many analysts seem convinced the central bank will soon trim its discount rate, now at 6.5%, in an effort to enliven the lethargic economy. A discount rate cut could be announced as soon as Friday or at least before July 23, when Fed Chairman Paul A. Volcker is scheduled to deliver his biannual monetary policy report to Congress, analysts have said.
One thing holding the Fed back is concern about the dollar. Some Fed governors have expressed reservations about a unilateral U.S. discount rate cut for fear that the action might sharply lower the value of the dollar against the Japanese yen and other major currencies.
Coordinated Move to Cut Rates
Additional declines in the dollar could discourage foreigners from buying dollar-denominated instruments, such as Treasury bills, notes and bonds, which has become a crucial source of funds for financing the U.S. budget deficit.
Clark said there were rumors in the markets today that the United States, Britain, France, Japan and West Germany were discussing a coordinated move. The Treasury's bellwether 30-year bond rose 21/32 point, or about $6.25 for each $1,000 in face amount. That trimmed its yield to 7.18% from 7.23% late Tuesday.
Elsewhere in the secondary market for Treasury securities, prices of short-term governments rebounded by 3/16 point to 9/32 point and intermediate maturities were up by 13/32 point to 23/32 point, according to Salomon Bros.
In corporate trading, industrials rose point in brisk dealings while utilities rose 3/4 point in more moderate activity. Among tax-exempt municipal bonds, general obligations slid 3/8 point but revenue bonds gained 3/8 point in average trading volume.