Stocks crept to a mixed close Monday, while bond yields fell for a third straight day on expectations that the Federal Reserve will raise interest rates high enough today to quell any threat of renewed inflation.
Blue chips got a boost from the bond market, but the broader indexes were weak, hurt for the second straight session by a downturn in the shares of technology companies.
The Dow Jones industrial average ended up 11.82 points at 3,671.5. But in the broader market, declines beat advances by about 6 to 5 on moderate volume of 234.7 million shares on the New York Stock Exchange, down from Friday's 252.08 million shares.
A spike in commodity prices erased some of early gains in the bond market. The price of the Treasury's bellwether 30-year bond closed up 17/32 point, or $5.31 per $1,000 in face value. Its yield, which moves in the opposite direction, fell to 7.44% from 7.49% late Friday.
Most market players expect the central bank's Federal Open Market Committee to decide at its policy-making meeting today to raise short-term interest rates to check inflation pressures, which tend to accompany strong economic growth.
But a recent string of economic reports, including news Monday on April industrial production, seemed to have softened the urgency for big rate hikes.
The Fed reported industrial production increased 0.3%, despite a drop in auto production. It also reported that industrial companies were operating at 83.6% of capacity, unchanged from the previous month.
The figures, which were roughly in line with expectations, followed government reports late last week of low consumer and producer inflation in April.
"My view is the data we've had over the last three trading days say the Fed still needs to continue with the program but there's no need to rush," said Alan Levenson, money-market economist at the UBS Securities unit of Union Bank of Switzerland.
The Fed has hiked the fed funds rate by a quarter point three times since early February, sparking an extended downturn that shaved almost 10% off the Dow's record high of 3,978.36, set Jan. 31.
Among other major market indicators, the Standard & Poors index of 500 stocks rose 0.35 to 444.49, while the NYSE's composite index rose 0.02 to 245.78. The Nasdaq composite index of mostly smaller issues fell 5.01 to 711.91.
Among the market highlights:
* Wal-Mart Stores lost 1 1/4 to 22 3/4. The company announced first-quarter earnings of 22 cents a share vs 20 cents in the same three months of last year.
* Technology shares were among the hardest hit. Cisco Systems fell 3/4 to 22 1/2, while Wellfleet Communications lost 4 to 27 3/4.
* Omega Environmental fell down 3 1/4 to 5 7/8 after Mabon Securities downgraded the stock.
* General Motors Corp.'s Electronic Data Systems unit and long-distance company Sprint said they were in talks about a possible merger. GM's class E shares gained 1 1/2 to 34 1/2 and Sprint added 1 to 37 5/8.
* Great Lakes Chemical sank 5 3/4 to 49 1/2 after it said earnings will not meet analyst projections.
* O'Sullivan Industries lost 6 1/2 to 9 7/8. After the close of trading on Friday, the company said it expects sales for the fourth quarter ending June 30 to fall between 5% and 10% below year-ago levels.
* Technology stocks, particularly computer networking shares, came under renewed assault on the Nasdaq market, sparked by Cisco Systems' plunge Friday. Cisco fell another 3/4 to 22 1/2, Wellfleet Communications dropped 4 to 27 3/4 and 3Com shed 3 7/8 to 51 1/8.
* O'Sullivan Industries, a maker of ready-to-assemble furniture, tumbled 6 1/2 to 9 7/8 on heavy volume. It said late Friday that it expects its sales and earnings for its fiscal fourth quarter to be below the same period in 1993.
Overseas markets were mixed. Tokyo's 225-share Nikkei average closed down 82.31 points at 20,188.44, while in Europe, Frankurt's 30-share DAX average ended at 2,271.11, up 12.36 points. In London, the key Financial Times 100-share average fell 3.6 points to 3,115.6.
Mexico City's Bolsa index dipped a slight 0.33 point to 2,239.84.
Meantime, the dollar was mixed against other major currencies Monday in light trading as dealers waited for the Fed's next move.
Gold prices advanced in U.S. trading, closing in New York at $383.00 an ounce, up $2.30. Silver fetched $5.563, up 16.3 cents.