Profit Taking Blamed as Dow Declines 5.33 : Dollar, Interest Rate News Fails to Save Rally

Stocks retreated again Friday in moderate trading, which brokers attributed largely to investors taking profits from the market’s big advance earlier in the week.

The weakness came despite news of a sharply higher dollar and lower interest rates in the credit markets, which some traders believe could emerge as key elements for a sustained summer rally.

The Dow Jones average of 30 industrial stocks, which fell 3.91 points Thursday, lost another 5.33 to close at 2,142.96, finishing the week with a gain of 38.94, or 1.9%. Broader market indexes were mostly lower, although they ended the week with gains.

Some traders said they weren’t surprised at the profit taking given the market’s unpredictability. Others were disappointed.

A few said talk had resurfaced that the dollar’s new strength, instead of helping stocks by easing inflation and attracting foreign buyers, could prove harmful by blunting the improvement in the nation’s trade deficit.

Foreign Interest Expected

“Anytime the market makes a good run, somebody comes out with something on the negative,” said Philip C. Puccio, senior vice president and manager of institutional trading at Dillon Read & Co. in New York. “People should stop thinking about the short term and take the blinders off.”

But Gerald Rivlin, executive vice president at Rodman & Renshaw Inc. in Chicago, said he believed that the investing climate had shifted, with more emphasis on the healthy elements in the economy.

Despite the weakness Friday, Rivlin said he expected foreign investors, particularly Japanese, to be aggressive buyers of stocks if the dollar’s strength persists.

“I think the market in Japan is topping it up,” he said. “There’s only one place to go, and that’s the U.S.”

Declining stocks outnumbered advances by more than a 7-to-6 ratio in nationwide trading of New York Stock Exchange-listed stocks, with 774 issues down, 662 up and 525 unchanged.

Volume on the floor of the NYSE totaled 179.88 million shares, down from 185.77 million in the previous session. Nationwide, consolidated volume in NYSE-listed issues, including trading at regional exchanges and on the over-the-counter market, totaled 205.59 million shares.

Among the most notable issues, Middle South Utilities jumped 2 1/8 to 13 on volume exceeding 9 million shares. The Supreme Court severely limited state authority to lower electric rates, reversing a lower court ruling that had voided a $326-million rate increase by one of the utility’s subsidiaries.

Mergers and acquisitions, rumored and real, affected several stocks. Payless Cashways rose 2 5/8 to 25 5/8 after management offered to buy the company for $26 a share. MacMillan rose 2 to 74 7/8 after Texas investor Robert M. Bass said he was prepared to start a hostile tender offer at $73 a share. Gould rose 2 7/8 to 17 7/8 on talk of a possible takeover offer from Westinghouse.

Oil stocks were widely lower on reports that Saudi Arabia and Kuwait might increase production sharply. Chevron fell 1 1/2 to 48; Amoco was off 1 1/8 to 76 1/2, and Atlantic Richfield declined 7/8 to 82 5/8.

Large blocks of 10,000 or more shares traded on the NYSE totaled 3,361, compared to 3,405.

The Wilshire index of 5,000 equities closed at 2,727.672, down 5.397 or 0.20% from the preceding trading day.

The NYSE composite index of all listed issues fell 0.47 to 154.56.

Standard & Poor’s index of 400 industrials fell 1.40 to 316.18, and S&P;’s 500-stock composite index fell 1.04 to 273.78.

At the American Stock Exchange, the market value index fell 0.33 to 308.49. The NASDAQ composite index for the over-the-counter market closed at 391.62, up 0.59.

In Tokyo, the 225-share Nikkei average rose 17.46 points to 27,750.39.

London’s Financial Times-Stock Exchange index of 100 blue chip shares, which shed 15 points to an early low of 1,863.9, closed at 1,871.3, down 7.6 points.