Dow Retreats 4 Amid Interest-Rate Worries

Stock prices posted a broad loss today amid doubts about the outlook for interest rates.

The Dow Jones average of 30 industrials dropped 4.09 to 1,279.04.

Declines outpaced advances by more than two to one on the New York Stock Exchange.

Big Board volume totaled 104.02 million shares, against 118.21 million in the previous session.

The NYSE’s composite index lost 0.60 to 104.51.

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

Analysts traced 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 is 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 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 this 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%.

The revised figure is more than 2 percentage points above the initial estimate of 2.8% made in December before the quarter had ended.

That initial projection was revised upward last month to 3.9% and boosted again today based on more complete data for economic activity in the period.

Bond prices fell in early trading for the third consecutive session.

Bond analysts said traders interpreted Volcker’s remarks that the central bank has adopted a neutral monetary stance as an indication that rates could be headed higher later this year.

In the secondary market for Treasury bonds, prices of short-term governments fell 7/32 point, intermediate maturities were off 10/32 point and long-term issues were down as much as 1/2 point, according to the investment firm of Salomon Bros. Inc.

In corporate trading, industrials and utilities were down point in moderate trading. Among tax-exempt municipal bonds, general obligations were off point and revenue bonds were down 3/8 point.

Yields on three-month Treasury bills rose 13 basis points to 8.38%. A basis point is one-hundredth of a percentage point. Six-month bills rose 10 basis points to 8.45% and one-year bills were up 10 basis points at 8.63%.