Dow Falls 8.49; Smaller Stocks Hit High Again : Market Overview

* Blue chip stocks eased, the Dow Jones industrials slipping 8.49 points to 3,045.62. For the week, the Dow lost 10.73 points.

But smaller stocks continued their streak, reaching new highs.

* Bonds closed mixed following Thursday’s big rally.

Stocks

The mild selloff in blue chips failed to set the tone for the market overall. Advancing stocks outnumbered losers 6 to 5 on the New York Stock Exchange, though Big Board volume slid to 183.34 million shares from Thursday’s active 205.85 million.

And once again, smaller stocks zoomed to a record, leaving blue chips behind. The NASDAQ composite index rose 2.80 points to 548.08, led by technology, biotech and financial stocks.

“The fact that the (small-stock) leadership is doing well means that the market is going to work higher,” argued Peter Canelo, chief strategist at County NatWest.

Other analysts, however, are concerned by what they view as rampant speculation in such small-stock areas as biotech. Such continued gains are “a little disconcerting” because market frothiness often signals a top, said trader Sid Dorr at Charles Schwab & Co.

Also, pointing out that the Dow index reversed Friday from brisk opening gains, he said, “Technically, that’s not good to see.”

But William Lefevre, analyst at Tucker Anthony, said that if investors begin to see even a glimmer of hope about improved fourth-quarter corporate earnings, stocks could soar anew--given that low interest rates offer few alternatives for peoples’ money today.

Among the market highlights:

* Health-care stocks were active. Biotech firm Immune Response jumped 3 1/2 to 57 1/2 on optimism about its AIDS vaccine, which is in clinical trials.

Among other biotech firms, Amgen rose 2 to 57 1/2 and Immunex gained 1 3/4 to 53 1/4.

Meanwhile, ICN Pharmaceutical plunged 4 1/4 to 12 1/4 in trading apparently related to a “short squeeze.”

* Becton Dickinson dropped 9 3/4 to 63 1/8 after the medical supplies firm reported flat quarterly results and forecast a disappointing 1992.

* California S&L; stocks continued to sink after a Merrill Lynch analyst apparently cut earnings estimates. Coast Savings lost 1 to 5 5/8, Citadel Holding dropped 2 1/4 to 17 1/2 and CalFed slid 1/4 to 2 3/8.

* Apple Computer jumped 3 1/2 to 53 1/4 following an upbeat meeting with analysts.

Overseas, financial stocks soared in Frankfurt, buoyed by a bond rally and hopes that Germany might avoid a near-term rise in interest rates. The DAX average surged 27.82 points to 1,606.22.

London’s Financial Times 100-share average followed Frankfurt, up 21 points to 2,559.0.

In Tokyo, stocks drifted. The Nikkei average rose 39.73 points to 24,486.49.

Credit

Long-term bond yields rode the momentum of Thursday’s rally, which began after a strong auction for the Treasury’s 30-year bond.

That bellwether bond rose 5/16 point, or $3.13 per $1,000, pushing its yield down to 7.87% from 7.92% Thursday. The auction yield on Thursday had been 8%.

Yields on shorter-term issues were mostly flat. Some traders were squaring positions before Monday’s Veterans Day holiday, when the government bond market will be closed.

Also, some analysts said the market was beginning to look toward next Wednesday’s report on wholesale inflation for October. For the bond market rally to continue, inflation must remain low, so the report is key.

The federal funds rate, the interest on overnight loans between banks, was 4.675%, unchanged from Thursday.

Currency

The dollar rose to 1.649 German marks in New York from 1.641 Thursday and to 130.43 Japanese yen from 129.87.

Traders said the dollar was helped by belief that U.S. interest rates may not drop much further, after this week’s latest Federal Reserve cuts.

Commodities

Hog and pork belly futures leaped on the Chicago Mercantile Exchange after the National Pork Producers Council said the Soviet Union is seeking 30,000 metric tons of U.S. pork.

Live hogs for December surged 1.32 cents to 42.27 cents a pound.

On the New York Merc, light sweet crude oil for December slid 19 cents to $23.01 a barrel.

On New York’s Comex, December gold rose 50 cents to $355.20 an ounce; December silver rose 0.5 cent to $4.00.