Blue Chips Hit by Late Selling; Dow Off 8.85

Blue-chip stocks pulled back near the closing bell Friday, but the broader market finished mixed in moderate trading.

Late selling related to the expiration of stock-index futures and options contracts helped push prices lower, but the volatile price swings that marked the two previous expiration days did not materialize.

The Dow Jones average of 30 industrials fell 8.85 to 1,297.94, giving it a loss for the week of 9.74 points.

However, overall losers led gainers by only a slight margin on the New York Stock Exchange.

Big Board volume totaled 101.39 million shares, against 100.32 million Thursday.

‘Flash’ Estimate

The economy, as measured by the gross national product, is growing at a modest 2.8% annual rate in the third quarter, the Commerce Department said. The initial, or “flash,” estimate was up slightly from the 1.9% advance recorded in the second quarter and came in a bit below what many Wall Streeters had hoped.

The September contracts for stock-index options, index futures and options on some individual stocks all expired--as they do four times each year, on the third Friday of March, June, September and December.

On the two previous expiration days this year, prices swung sharply in the sessions’ closing minutes as traders unwound previously established arbitrage positions.

In setting up the positions weeks earlier, the traders had bought or sold the options and futures while taking the opposite action with the indexes’ underlying stocks, in the hope of profiting from their differences in price.

On the most recent expiration day, June 21, the Dow Jones industrial average soared 24.75 points, with much of the gain coming in the final 30 minutes of trading.

16 Million Shares

But analysts said there were indications that some of the positions based on the September index contracts were closed out earlier this month, limiting another abrupt price swing near the close.

“About 16 million shares (traded) in the last 15 minutes, but there was nowhere near the velocity” for which Wall Street had braced, said Jack Baker, head of block trading at Shearson Lehman Bros.

Peabody International topped the NYSE’s active list and rose 1/8 to 10 1/2 after Miami financier Victor Posner sold a 4.01-million-share block at that price.

The block, representing about 34% of Peabody’s total shares outstanding, was sold by Posner to institutional investors. That cleared the way for Peabody to complete its previously announced merger with Pullman Co., said Wilbur Ross, a managing director of Rothschild Inc., Peabody’s investment banker.

Frontier Holdings climbed 1 3/8 to 18 3/4 and Texas Air was unchanged at 16 7/8 on the Amex following Texas Air’s offer Thursday to buy the parent of Frontier Airlines for $20 a share.

The Frontier proposal apparently dampened speculation that Texas Air might try to buy NWA, the holding company for Northwest Airlines, which tumbled 3 to 52 3/4 in heavy NYSE trading.

IBM Falls

TRW jumped 5 1/8 to 82 after announcing a major restructuring that includes the buy-back of up to 8 million of its shares.

Among the blue chips, International Business Machines fell 1 to 126 3/4, Exxon dropped 3/8 to 49 3/4 and General Motors lost 1 to 67 1/2.

Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 117.66 million shares.

Large blocks of 10,000 or more shares traded on the NYSE totaled 2,025, compared to 1,962 on Thursday.

In the bond market, prices rose after the government released its preliminary GNP figures.

In the secondary market for Treasury bonds, prices of short-term governments rose 1/8 point, intermediate maturities were up point and long-term issues were up 14/32 point, according to the investment firm of Salomon Bros.