Dow Ends Down 36.64 After Late Rally Trims 63-Point Midday Loss

A late rally wasn’t enough to save the anxious stock market Friday from a loss that dropped the Dow Jones industrial index 36.64 points to 2,644.80.

The Dow, off as much as 63 points in the early afternoon, closed out the week with a loss of 71.78 points, or 2.6%. The decline was the market’s sixth-consecutive weekly drop and left the Dow at its lowest point since March 1.

The encouraging news that the U.S. trade deficit had fallen 35% in June had little effect on the slide, which was again driven by worries about the Mideast, signs of inflation and impending recession. Traders said the late rally, which began after 2 p.m., came largely from the close-out of August contracts for stock-index futures and options, and stock purchases to make up for borrowed, or short, stock positions.

Volume rose to a moderately heavy 212.6 million shares, from Thursday’s 138.9 million, as money managers adjusted their portfolios so they wouldn’t be blindsided by bad news over the weekend. It was the first time since the session of Aug. 7 that the Big Board trading volume exceeded 200 million shares.

“Yesterday, there was threatening news from the Middle East and people got worried; today, there was no news and the lack of it worried everyone,” said Larry Wachtel, analyst with Prudential-Bache Securities in New York.

Among broader market indexes, the Standard & Poor’s 500-stock index lost 4.56 to 327.83, or 1.4%, the same percentage drop as the Dow. The NASDAQ over-the-counter composite gave up 8.78 to 393.49, or 2.2%.

On the Big Board, declining stocks routed advancing issues by a margin of 1,315 to 300.

In other major markets:

Oil again surged. Contracts of the benchmark crude for September delivery soared $1.27 to $28.63 in New York trading.

Gold and interest rates inched up but did not show the sharp climbs of previous sessions when oil rocketed.

The dollar was down in New York trading against all major currencies except the Japanese yen. The dollar was quoted at an all-time low of 1.550 German marks, compared to 1.552 on Thursday, and 147.60 yen, compared to 147.25 yen on Thursday.

Overseas stock markets started the decline. In Tokyo, the Nikkei index dropped 762.72, or 2.8%, to 26,786.72; London’s Financial Times-Stock Exchange 100-share index lost 45.2 points, or about 2%, to 2176.9. Shares in Milan, Italy, were down 4%, and Paris and Frankfurt, West Germany, hit new 1990 lows. Frankfurt’s DAX share index lost 61.54, or 3.6%, to close at 1,665.88.

Most markets have at least some optimistic analysts, but Friday they may have been on vacation.

“We see ever further downside potential over the next weeks, and we may even go to a bear market, which we define as a 20% decline from the peak,” said Louise Yamada, vice president and technical analyst for the Smith Barney, Harris Upham brokerage in New York.

In her view, the market might find its next stabilizing point at between 2,500 and 2,550 on the Dow.

Jack Conlon, head of equity trading at Nikko Securities International, said some investors have been pinning hopes on next week’s meeting of the Federal Reserve Bank’s Open Market Committee, at which the central bank officials are expected to take up whether to ease credit.

But, he said, with the recent signs of inflation, even if the Fed did move, it would probably be only to drop rates one-quarter percentage point. “That wouldn’t be nearly enough to do what you’d want,” Conlon said.

The week left the Dow some 354.95 points, or 11.8%, below the all-time high of 2,999.95 it posted July 17. But the Dow remains 101.56 points above its 1990 closing low, which came Jan. 30.

Market highlights:

* Once again, many of the worst-hit stocks were the supposedly recession-resistant stocks that investors flocked to in recent weeks. Coca-Cola fell 1 1/8 to 42, Pepsico lost 2 to 73 1/4, Anheuser-Busch tumbled 1 3/4 to 38 7/8, General Mills dropped 2 to 85 and Heinz lost 1 5/8 to 32 1/2.

* Industrial stocks falling significantly on recession worries included Deere, down 3 3/8 to 57 1/4; Caterpillar, off 1 3/8 to 44 5/8, and Fluor, off 2 1/4 to 38 3/8. Boeing plunged 2 1/8 to 48 1/2 on concerns about future plane orders, given the airline industry slump.

* Many high-tech stocks were bludgeoned. Conner Peripherals dropped 2 to 21 1/4, Apple slumped 2 to 36 1/2, AST Research fell 1 to 18 7/8, Western Digital lost 3/4 to 10 1/8 and IBM gave up 2 3/8 to 101 3/8.

* Oil stocks continued to dominate the short winners’ list. Arco jumped 2 1/2 to 137 1/2, Unocal gained 1 1/8 to 33 7/8, Chevron rose 1 1/8 to 78 5/8 and Royal Dutch added 1 3/8 to 84 3/4. Gold stocks, meanwhile, were mostly lower on profit taking.

* Some beaten-down S&L; stocks managed to rise. Ahmanson rose 1/4 to 17 1/8 and Downey added 1/4 to 14. But California bank stocks continued to slide. Imperial Bancorp fell 1 1/2 to 13 1/2, Wells Fargo tumbled 2 1/8 to 57 1/2 and First Interstate lost 1 7/8 to 29 3/8.