Stocks Lower in Face of Rising Interest Rates

NEW YORK —  The stock market declined broadly Thursday, yielding to the pressure of rising interest rates.

The Dow Jones average of 30 industrials, up 2.54 on Wednesday, dropped 4.09 to 1,279.04.

Volume on the New York Stock Exchange slowed to 104.02 million shares from 118.21 million Wednesday.

Analysts attributed the market’s weakness to a statement by Paul A. Volcker, chairman of the Federal Reserve Board, that the Fed had stopped easing credit conditions.

In congressional testimony Wednesday, Volcker said the central bank has not switched to tightening credit but was pursuing a policy of “a little more caution.”

Nevertheless, investors seemed to interpret his remarks as a signal that the decline in interest rates since last summer was about over.

Many analysts believe that the Fed is now satisfied that the possibility of any recession in the near future has been averted and that economic growth is proceeding at a brisk pace.

Support for that view was provided Thursday morning when the Commerce Department raised its figure for economic growth in the fourth quarter of 1984 to an annual rate of 4.9% from an earlier estimate of 3.9%.

Consolidated Edison Active

That news sent interest rates higher for the second straight day in the credit markets.

Rates on short-term Treasury bills rose 10 to 15 basis points, or hundredths of a percentage point. Prices of long-term government bonds, which move in the opposite direction from interest rates, posted losses approaching $5 for every $1,000 in face value.

Consolidated Edison of New York led the active list, up 1/8 at 30 3/4. A block of more than 2.85 million shares traded at 30 5/8.

Other utility and financial issues that are often sensitive to changes in interest-rate expectations showed spotty losses. Federal National Mortgage, for example, was down 5/8 at 17 5/8 in active trading.

In the savings and loan group, Great Western Financial dropped 3/4 to 26 7/8 and H. F. Ahmanson was off 1 at 29.

Auto stocks also gave ground, with General Motors down 1 1/8 at 77 1/2; Ford Motor was off 1 1/8 at 43 3/4, and Chrysler fell 1/2 to 32 3/4.

Advisers to President Reagan have recommended that he allow restraints on Japanese car imports to expire as scheduled on March 31. William E. Brock, the U.S. trade representative, told a congressional committee Wednesday that the absence of the restraints would put American auto makers in “a much more competitive situation.”

In the daily tally on the Big Board, more than two issues declined in price for every one that rose. The exchange’s composite index fell 0.60 to 104.51.

Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 124.66 million shares.

Standard & Poor’s index of 400 industrials lost 1.03 to 201.13, and S&P;’s 500-stock composite index was down 0.99 at 180.19.

The NASDAQ composite index for the over-the-counter market slipped 0.28 to 286.99.

At the American Stock Exchange, the market-value index closed at 228.17, down 3.03.

The Wilshire index of 5,000 equities closed at 1,864.740, down 10.044.

Bond Prices Fall

Large blocks of 10,000 or more shares traded on the NYSE totaled 1,945, compared to 2,347 on Wednesday.

Bond prices fell and interest rates rose for the third consecutive session.

In the secondary market for Treasury bonds, prices of short-term governments fell 11/32 point, intermediate maturities were off 3/8 point and long-term issues were down as much as 5/8 point, according to Salomon Bros. Inc.

In corporate trading, industrials and utilities were down 3/8 point in moderate trading.

Among tax-exempt municipal bonds, general obligations were off point and revenue bonds were down 1/2 point.

Yields on three-month Treasury bills rose 15 basis points to 8.40%. Six-month bills rose 15 basis points to 8.50%, and one-year bills were up 12 basis points at 8.65%.

Yields on 30-year Treasury bonds rose to 11.58% from 11.54% late Wednesday.

The federal funds rate, the interest on overnight loans between banks, traded at 8.6875%, up from 8.675% late Wednesday.