Dow Ends Slowest Week in Years Up 3.71

Blue chip stocks drifted higher Friday, but other stocks lagged as the market ended its slowest week in five years.

The Dow Jones industrial index rose 3.71 to close at 2,629.21. But in the broader market, declining issues led gainers 786 to 704 on the New York Stock Exchange.

Only 111 million shares changed hands on the Big Board, compared to 102.9 million Thursday.

Volume for the four-day week, at about 350.8 million shares, was the lightest since 329.8 million shares changed hands in the week of Dec. 27, 1985, which also was shortened by a holiday.

“No one seems to have been coming to work this week,” said Jay McElroy, principal at 1838 Investment Advisors. Those who were around found few incentives to buy, he added.

“The economic news is getting worse. I think everything points to a recession,” he said.

Two reports issued Friday added to mounting evidence that the economy is contracting after eight years of growth.

The government’s index of leading indicators--intended to predict the economy’s course during the next six to nine months--was down a sharp 1.2% last month. The Purchasing Management Assn.’s economic index fell in December to its lowest level in eight years. The reports came a day after the government announced a record-tying 10.5% drop in November durable-goods orders.

“The rally is beginning to fade, and there’s the likelihood the market will be on the defensive going into January,” said William Raftery, an analyst at Smith Barney.

For the week the Dow slipped 4.45, it but has still gained 11% since bottoming out in October.

Like many other analysts, Raftery expressed concern about corporate earnings reports that will begin to be issued next month. “Things are not going to be spectacular,” he said.

Concerns about the Mideast continued to weigh on the market as the Jan. 15 U.N. deadline for Iraq to withdraw from Kuwait nears.

Among the market highlights:

* Georgia Gulf was up 3/4 to 10. A C. J. Lawrence analyst reaffirmed a buy rating on the company, based on increased exports for certain plastic products.

* VeloBind Inc. dropped 2 1/8 to 7. General Binding Corp. said it put off acquiring the firm because of Justice Department concerns.

* Longs Drug Stores added 1 1/4 to 36 7/8 on speculation that the company could be sold because of the death of its chairman.

* Flagship Financial dipped 5/8 to 6 5/8. The company said it will report a loss because of an increase in its loan-loss reserves.

In London, shares drifted lower on thin volume. The Financial Times-Stock Exchange 100 index closed down 7.4 at 2,160.4. The London market will be open Monday but closed New Year’s Day.

In Frankfurt, German shares, weighed down by concern about the Gulf crisis and the Soviet political situation, ended at their lowest level in seven weeks in thin trading. The 30-share DAX index fell 12.64 to 1,398.23.

In Tokyo, the 225-share Nikkei index lost 91.99, or 0.38%, to 23,848.71. The market will reopen for a half-day session Jan. 4 before normal trading resumes Jan. 7.

CREDIT Bonds Retreat on Surprising Job News Bond prices staged a sharp retreat in light holiday trading Friday in response to war-like news about the Persian Gulf and a better-than-expected jobless report.

The Treasury’s bellwether 30-year bond dropped 21/32 point, or $6.56 per $1,000 in face amount. Its yield rose to 8.30% from 8.24%.

The session was one of the most lightly traded of the holiday season, with many traders absent becaused of New York’s first snowfall and holiday vacations. Government securities markets closed at 3 p.m. instead of the usual 5:30 p.m. because of the inclement weather and the coming New Year’s holiday.

Market participants blamed much of the long bond’s price drop on the release of a government report of better-than-expected unemployment figures. The Labor Department reported that claims for state unemployment insurance, on a seasonably adjusted basis, fell by 14,000 to 441,000 in the week ended Dec. 15 from 455,000 claims the week before.

The federal funds rate, the interest on overnight loans between banks, traded at 7.5%, down from 10% late Thursday.

CURRENCY Dollar Tumbles in Very Thin Trading The dollar fell sharply on world currency markets Friday, with extremely thin trading accentuating the downward move.

The dollar began declining in Asian trading and continued to fall when dealings shifted to Europe as investors took profits.

Shortly before the U.S. market opened, “the dollar fell hard across the board” and was unable to stage a convincing recovery, said Marc Chandler, an analyst with IDEA.

In Tokyo, the dollar fell to a closing 136.05 Japanese yen from 136.65 yen on Thursday. Later, in London, it traded at 135.05 yen. In New York, the dollar settled at 134.90 yen, down from 136.40 yen.

In London, the British pound rose to $1.9220 from $1.8870 late Thursday. In New York, it cost $1.9282 to buy one pound, more expensive than Thursday’s $1.8895.

Other late dollar rates in New York, compared to late Thursday’s rates included: 1.4935 German marks, down from 1.5255; 1.2745 Swiss francs, down from 1.3040; 5.0810 French francs, down from 5.1935; 1,126.50 Italian lire, down from 1,151.75, and 1.1601 Canadian dollars, down from 1.1616.

COMMODITIES Gold Futures Prices at a 3-Month High War fears and a weaker dollar helped push prices of gold futures to their highest levels in nearly three months Friday on New York’s Commodity Exchange. Other precious metals also soared.

On other markets, crude oil rallied; copper futures surged; orange juice retreated; grains and soybeans were lower, and livestock and meat futures were mixed.

Gold futures settled $8.60 to $9.10 higher, with the contract for January delivery at $394, the highest settlement of a near-month gold contract since Oct. 8.

Silver futures were 9 to 9.9 cents higher, with January at $4.19 an ounce; platinum futures finished $4.50 to $7.20 higher on the New York Mercantile Exchange, with January at $409.90 an ounce.

Prices soared in thin trading conditions as the dollar weakened and Mideast tensions mounted.

February gold settled near the day’s high at $396.20, “suggesting to me that the next stop will be somewhere in the low $400 area,” said Peter Cardillo, commodities trading adviser with Jesup, Josephthal & Co. in New York.

Market Roundup, D6