Dow Inches Forward to End Week Up 31.78

Supported by a stronger dollar and firmer Treasury bond prices, the stock market chalked up another gain Friday to set fresh new highs since the crash nearly 15 months ago.

The Dow Jones average of 30 industrials rose 3.75 to 2,226.07, finishing the week with a net gain of 31.78 points.

Advancing issues outnumbered declines by about 4 to 3 in nationwide trading of New York Stock Exchange.

Despite the advance, brokers said they were concerned by Friday’s thin volume, which showed many investors are still shying away from stocks and cast doubt on the strength of the current rally. Volume on the floor of the Big Board came to 132.32 million shares, down from 183 million in the previous session.

Soon after the opening, share prices succumbed to profit taking, which analysts had expected following the market’s strong performance over the previous two days, when it twice set post-crash closing highs and gained nearly 30 points.

But by mid-afternoon investors were capitalizing on the early declines to buy stocks at cheaper levels, boosting prices, market analysts said.

Stock prices received some help from a decline in short-term interest rates, they said. Bond prices rose and bill rates fell after news of a lower-than-expected 0.2% rise in December’s U.S. retail sales figure.

A sharp rise in the dollar, which rose to its highest level in three months despite concerted central bank intervention, also lent some support to stocks.

Tokyo share prices ended a strong week at a record high despite the death last Saturday of Emperor Hirohito. The Nikkei 225-share index rose 154.93 points, or 0.50%, to 31,298.38. The index was up 1,088.84, or 3.60 % for the week.

Share prices also rose in heavy trading on the London Stock Exchange, bringing an extended three-week holiday trading account to a buoyant close. At the close of trading, the Financial Times 100-share index was up 11.2 points at 1,862.1.

CREDIT

Bond prices rose sharply in busy trading, boosted by a strong dollar and a lower-than-expected December retail sales figure that eased fears of inflation.

The Treasury’s benchmark 30-year bond rose 15/16 point, or about $9.37 per $1,000 in face value. Its yield, which moves in the opposite direction from its price, fell to 8.88% from 8.97% late Thursday. The yield was at its lowest level since Nov. 2, when it was 8.78%.

The federal funds rate, the interest on overnight loans between banks, was quoted late in the day at 9%, down from 9.063% late Thursday.

CURRENCY

The dollar closed a highly volatile session sharply higher after at least eight central banks intervened to stem its recent potentially disruptive advance.

The U.S. currency closed at a three-month high against the West German mark and Japanese yen, rising to 1.8445 marks from Thursday’s 1.8270 marks and to 127.40 yen from 126.40. The dollar had fallen after the central banks’ action but later rebounded with support from high U.S. interest rates.

The central banks of the United States, West Germany, France, Britain, Canada, Belgium, Switzerland and Italy made concerted dollar sales during the session, the fourth such coordinated attack on the currency this week, dealers said.

Most of the dollar’s gains occurred after midday in New York, when currency trading ceased in Europe and the European central banks were no longer in the market selling dollars, traders said.

The dollar had touched a European high of 1.8430 marks in London before the banks intervened, pushing the currency down to 1.83 marks at the close there. The bank intervention dragged the dollar down to 1.8275 marks and 126.25 yen in New York before it rallied in the afternoon. Despite the intervention--designed to stabilize the surging dollar against currencies such as the mark--the dollar retains a firm undertone, dealers said.

Speculators have been buying dollars on expectations of higher U.S. interest rates, which would offer investors a larger return on dollar assets. The market feels that U.S. banks will soon raise their prime rate, a benchmark often used to set other rates.

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