Financial Markets : Dow Falls 28.64 as Late Selling Wave Foils 2nd Straight Try for Record

The stock market yielded to a late round of selling Friday, falling short for the second day in a row in its bid to reach a new high in the Dow Jones industrial index.

Dow Jones index of 30 blue chips, up more than 15 points in early trading, was down 28.64 at 2,683.99 by the close.

That left the index with a 30.54 gain for the week but still short of the closing peak of 2,722.42 it reached on Aug. 25, 1987.

Declining issues outnumbered advances by about 5 to 3 in nationwide trading of New York Stock Exchange-listed stocks, with 586 up, 934 down and 477 unchanged.

Volume on the floor of the Big Board came to 197.55 million shares, against 198.66 million in the previous session. Nationwide, consolidated volume in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 237.78 million shares.

Blue Chips Decline

After an abortive run to new highs Thursday, analysts said buyers drew some fresh inspiration Friday morning from evidence that inflationary pressures have eased significantly as the economy has slowed.

But interest rates, after an initial decline in the credit markets, surged upward, and stock traders lost their early enthusiasm.

Losers among the blue chips included International Business Machines, down 2 at 115 1/2; American Telephone & Telegraph, down 5/8 at 39 3/8; General Electric, down 3/4 at 57 5/8; Philip Morris, down 3 1/4 at 160, and Eastman Kodak, down 1 3/4 at 50.

In Tokyo, stocks closed off from early highs in thin dealings. The Nikkei index of 225 selected issues fell 6.84 points to 34,712.96.

Share prices closed higher in London. The Financial Times-Stock Exchange 100-share index closed 6.9 points higher at 2,354.2.

Credit

Bond prices finished lower after one of the wildest sessions of the year, surging on encouraging inflation news but plunging as traders decided the Federal Reserve was not ready to loosen its credit policy.

The Treasury’s 30-year bond ended up with a loss of 1 1/4 points, or about $12.50 per $1,000 face amount. Earlier in the day, the bond was up by about $15 for every $1,000 in face value.

“We used to get whipsaw days like this back in 1981 and 1982, but you don’t see reversals like this that often,” said Elliott Platt, fixed-income research director for Donaldson, Lufkin & Jenrette Securities Corp.

The 30-year bond’s yield, which moves in the opposite direction from price, rose to 8.15% from 8.05% late Thursday. At midday, the bond’s yield had fallen to about 7.91%.

Yields on three-month Treasury bills, meanwhile, rose to 8.18%, with the discount up 8 basis points to 7.92%. Yields on six-month bills rose to 8.06% as the discount rose 10 basis points to 7.65%. Yields on one-year bills climbed to 8.16% as the discount rose 12 basis points to 7.60%.

The federal funds rate, the interest rate banks charge each other for overnight loans, was quoted at 8.9375%, down from 9% late Thursday.

Currency

The dollar soared to its highest levels since early summer in heavy worldwide trading, boosted largely by technical factors.

Gold prices sank. On the Commodity Exchange in New York, gold bullion for current delivery fell $2.10 an ounce to close at $365.20. Republic National Bank of New York quoted a late bid for gold at $363.50, down from $366 on Thursday.

The dollar’s rally was already under way overseas when the government released its economic data.

Concerted dollar selling by the Federal Reserve and other major central banks failed to halt the currency’s climb, and that only served to “reinforce its strength,” said Ronald Holzer, chief dealer at Harris Trust & Savings Bank in Chicago.

“The way the market absorbed the dollars . . . means intervention will be ineffective in the short run,” he said.

In addition, the market was buoyed by Japanese investors’ hearty appetite for U.S. Treasury issues. The Japanese bought more 30-year bonds than had been expected at this week’s auction, and traders think the trend could continue.

In Tokyo, where trading ends before Europe’s business day begins, the dollar rose 1.05 Japanese yen to close at 140.10 yen. Later in London, it was quoted at a higher rate of 141.90 yen. In New York, the dollar closed at 141.90 yen, up from 139.80 yen on Thursday.

In London, the dollar spurted against the British pound. It cost $1.5850 to buy one pound, cheaper than $1.6280 late Thursday. In New York, it cost $1.5820 to buy one pound, less expensive than Thursday’s $1.6188.

Gold prices fell in London to a late bid of $362 an ounce, compared to late Thursday’s $366.25. In Zurich, Switzerland, gold fell to close at $361, compared to $366.35 late Thursday.

Earlier in Hong Kong, gold fell $1.51 to close at $365.55.

Commodities

Copper futures prices surged to a three-month high Friday on New York’s Commodity Exchange on panicky buying fueled by expectations of a miners strike beginning Monday in Peru, the world’s sixth-largest producer.

The threatened strike is the latest addition to a long list of supportive factors that may point toward a repeat of the dramatic upward moves that occurred in late 1987 and late 1988.

On other markets Friday, corn futures rose the daily limit; sugar was sharply higher; energy futures fell; precious metals were mixed, and livestock and meat futures were mixed.

Copper futures settled 4.75 cents to 5 cents higher, with August at $1.1735 a pound, the highest settlement price for a nearby contract since May 19.

Sugar contracts settled 0.33 cent to 0.57 cent higher, with October at 14.42 cents a pound.

Crude and heating oil futures slipped while gasoline was mixed in moderate trading on the New York Mercantile Exchange.