Dow Index Rises 2.71; Tobacco Stocks Jump

The Dow Jones index of 30 industrials inched ahead to a new closing high Friday as the stock market closed out an erratic session with some modest gains.

Tobacco stocks ranked among the day’s standout performers following a court ruling in favor of the industry on a key point in a product liability case.

The Dow index rose 2.71 to 2,709.50, bringing its net gain for the week to 24.07 points.

Volume on the New York Stock Exchange came to 189.58 million shares, against 196.57 million on Thursday.

Before the market opened, the Labor Department reported that the consumer price index rose 0.2% in July. The figure came in below most advance estimates on Wall Street and reinforced hopes that inflation would remain subdued.

Even with that positive news, however, some traders were proceeding warily, awaiting the last trading late Friday of a series of expiring stock options and futures contracts.

There was some talk that this might produce heightened volatility in the market as professionals engaged in computer program-trading strategies closed out their positions. As it turned out, the market closed without any notable disruptions.

In addition, analysts said investors remained in an edgy mood over continued pressure on the dollar in foreign exchange.

The tobacco stocks jumped after a federal appeals court in Atlanta ruled that American Brands can raise the issue of health warnings in advertisements and on packaging in defending itself against a product liability suit.

American Brands shares gained 2 7/8 to 55 3/8, RJR Nabisco rose 2 3/4 to 64 and Philip Morris surged 4 3/4 to 111 1/2. Philip Morris by itself accounted for all of the Dow Jones industrial average’s gain.

Among other actively traded blue chips, IBM was unchanged at 174 3/4, General Electric lost to 65 5/8 and AT&T; was down 3/8 at 34 3/4.

Manpower Inc. rose 3 3/4 to 81 3/4. The company said its management will recommend that directors agree to an $82.50 a share takeover bid from the London-based Blue Arrow. Later in the day, Manpower’s directors agreed to the buyout.

Bolar Pharmaceutical, traded on the American Stock Exchange, gained 6 3/8 to 35 1/8, while Smithkline Beckman fell 5 3/4 to 65 3/4. Bolar said it received Food and Drug Administration approval for a generic form of an anti-hypertensive drug marketed by Smithkline.

Advancing issues just barely outnumbered declines on the NYSE.

Standard & Poor’s index of 400 industrials rose 1.36 to 392.34, and S&P;’s 500-stock composite index was up 1.06 at 335.90. The Wilshire index of 5,000 equities closed at 3,291.111, up 11.045.

The NASDAQ composite index for the OTC market climbed 2.45 to 455.20. At the American Stock Exchange, the market-value index closed at 363.47, up 2.58.

The bond market wrapped up a generally miserable week by ignoring the good news on inflation and heading lower.

The price of the Treasury’s bellwether 30-year bond fell 1/2 point Friday, or about $5 for every $1,000 in face value, after losing ground most of the week.

The yield on the bond, which moves inversely to its price, rose to 8.96% from 8.93%. The yield stood at 8.77% a week ago.

The bond market had declined during the week in sympathy with the dollar’s erosion in foreign exchange trading. On Friday, the phenomenon continued.

“The weakness of the dollar has overwhelmed the bond market,” said Marshall Front, a senior partner at Stein Roe & Farnham, a large investment counseling firm in Chicago.

The dollar began to slip a week ago after the government reported a widening U.S. trade deficit in June. The report prompted worries among currency traders that the dollar would have to fall further to make U.S. goods more competitive abroad and ease the trading imbalance.

The dollar’s slide, in turn, set off a bond market tumble that began Monday as investors rushed to the sidelines to see where inflation and interest rates were headed.

A lower dollar is often a precursor of higher inflation and a bearish sign for bonds because inflation can dilute the value of fixed-rate investments.

Most analysts agreed that yields on the 30-year bond would have to move above 9% to spark some buying interest in the market.

In the secondary market for Treasury bonds, prices of short-term governments fell 1/16 to 1/32 point, intermediate maturities were unchanged to point lower, and 20-year issues slipped 7/32 point, according to figures provided by Telerate Inc., a financial information service.

The movement of a point is equivalent to a change of $10 in the price of a bond with a $1,000 face value.

Yields on three-month Treasury bills were up 4 basis points at 6.10%. The six-month bill fell 1 basis point to 6.24%. The one-year bill was off 2 basis points at 6.54%. A basis point is one-hundredth of a percentage point.

The federal funds rate, the interest on overnight loans between banks, was quoted at 6.675%, unchanged.