Profit Takers Depress Market; Dow Drops 5

The stock market closed out its first losing week since early January with a moderate decline Friday.

Analysts said rising interest rates and uncertainty about the outlook for the Federal Reserve’s credit policy prompted some traders to cash in on the market’s recent gains.

The Dow Jones average of 30 industrials dropped 5.86 to 1,282.02, finishing the week with a net loss of 7.95 points. That broke a string of five consecutive weekly gains.

Volume on the New York Stock Exchange tailed off to 106.47 million shares from 139.73 million Thursday.

The market seemed to have an abundance of favorable economic news working in its favor.

The nation’s stock and commodity marketswill be closed Monday in observance of Presidents’ Day. Most government offices, many banks and some businesses will also be closed. The Times will not publish a Business section Monday. The regular Monday Business features and tables will appear in Tuesday’s editions.

The Labor Department reported Friday morning that the producer price index of finished goods was unchanged in January after posting increases of 0.3% in November and 0.2% in December.

The latest figure bolstered hopes that inflation would remain at low levels in the months ahead despite continued growth of the economy.

Separately, the Federal Reserve Board said that industrial production rose a seasonally adjusted 0.4% last month.

But interest rates rose in the credit markets amid doubts about the longer-term outlook for the Fed’s credit policy.

The central bank issued revised statistics late Thursday that showed faster growth in the money supply last year than had previously been reported. There was also a rumor, flatly denied by the Fed, that its chairman, Paul A. Volcker, had resigned.

Furthermore, brokers said many traders opted to cash in some profits from the market’s recent rally after it failed Wednesday and again Thursday to hold above the 1,300 level in the Dow Jones industrial average.

Unocal was actively traded, down 1 3/4 at 46. A partnership including Mesa Petroleum announced late Thursday that it had bought a big stake in the company but said it had no present plans to seek to gain control of it.

Telerate Inc. dropped 1 1/2 to 20 1/2. The company said it planned a secondary offering of 5 million shares to be sold by certain of its stockholders.

Control Data, which announced price cuts on its hard-disk systems for use with International Business Machines personal computers, lost 1 1/8 to 35 5/8.

Pantry Pride led the active list, up 5/8 at 5 in trading that included a 1.37-million-share block at 4 3/8.

Auto issues finished lower in brisk trading. General Motors dropped 3/4 to 78 1/8, Ford Motor fell to 45 5/8 and Chrysler dropped 7/8 to 32 1/2.

In the daily tally on the Big Board, about five issues declined in price for every four that advanced.

Large blocks of 10,000 or more shares traded on the NYSE totaled 1,968, compared to 2,789 on Thursday.

The federal funds rate, the interest on overnight loans between banks, traded at 8.688%, up from 8.5% late Thursday.

In an apparently delayed reaction, bond prices fell as much as $10 for every $1,000 in face value in response to to the Fed’s report on the money supply.

The bond market showed little reaction to that report late Thursday, holding on to the gains that it had established in trading earlier in the day. But bond prices slid at Friday’s opening, erasing the previous session’s gains.

In the secondary market for Treasury bonds, prices of short-term governments fell 3/32 point, intermediate maturities were off between point and 1/2 point and long-term issues were down a full point, according to the investment firm of Salomon Bros. Inc.

In corporate trading, industrials and utilities fell 7/8 point in light activity.

Among tax-exempt municipal bonds, general obligations and revenue bonds were each off 3/8 point.

Yields on three-month Treasury bills rose 3 basis points at 8.19%. Six-month bills fell 1 basis point to 8.27% but one-year bills rose 2 basis points to 8.43%.

Yields on 30-year Treasury bonds rose to 11.34% from 11.22% late Thursday.