Dow Gains 5.94; Bonds Rise After Early Loss : Market Overview

Highlights of Friday’s market activity, compiled from Times staff and wire reports:

* Blue chip stocks drifted to a slightly higher close as the market paused to allow for the expiration of stock options, stock index futures and stock index options.

* Long-term interest rates rose modestly after opening lower as profit taking and creeping inflation fears took their toll.

Stocks

Lacking much movement in bonds or any release of economic data, the stock market focused on the contract expirations, which created some narrow volatility throughout the day.

The Dow average closed up 5.94 points to 3,471.58, having missed an opportunity to hit a record high during the session. The index peaked at 3,477.26 during the day, which was just short of last Wednesday’s record high close of 3,478.34.

In the broader market, declining issues outnumbered advances by about 9 to 7 on New York Stock Exchange volume of 339.66 million shares, against Thursday’s 241.18 million.

Sharp losses in biotechnology and technology stocks hurt the smaller-cap market. The NASDAQ index lost 4.69 points to end at 682.72.

Investors were cautious ahead of the “triple witching” expiration, which often causes volatility.

“I’ve been sitting here twiddling my thumbs,” one trader said.

Meanwhile, analysts are keeping a close eye on the Commodity Research Bureau index, which rose 1.8 points to 214. The index, which is a measure of inflation, has become a source of fresh concern after recent rises in consumer and producer prices.

A.C. Moore, an analyst at Argus Management, said, “The signs of inflation are starting to filter back into the markets. Inflation is certainly not dead.” Moore said the rise in inflation should prompt some portfolio adjustments, including a shift to more economically sensitive stocks.

Among the market highlights:

* Chiron Corp. slumped 2 1/4 to 50 1/2 after the company said it did not expect to make any profit this year from its Betaseron drug for multiple sclerosis, which won recommendation for approval by Food and Drug Administration advisory panel.

* Other biotech losers included Amgen, off 1 to 33, Biogen, off 3/4 to 27 1/2, and Gensia, off 2 1/4 to 16.

* Warner Lambert shares were down 1 3/4 to 68 1/4, even though its Cognex drug was recommended for approval by an FDA panel. Smith Barney and PaineWebber upgraded their ratings on it.

* J.B. Hunt slumped 3 3/8 to 18 1/8 after it warned of lower first-quarter earnings.

* Ferro Corp., a maker of ceramics, chemicals and plastics, lost 2 7/8 to 27 7/8. The company said it expects lower first-quarter earnings because of continued slow business conditions in Europe.

* Technology decliners on the NASDAQ included Intel, down 2 to 113 3/4, and Cirrus Logic, off 1 7/8 to 24 1/4.

Stocks were mixed in overseas trading. Share prices rose on the London stock exchange, with the Financial Times 100-share average rising 20.4 points to 2,900.1. Tokyo stocks ended lower as investors took profits after recent rallies. The 225-share Nikkei average was down 190.73 points to 18,537.17. In Frankfurt, the DAX 30-share average closed up 2.62 points to 1,698.81.

Credit

Although the government bond market was volatile, players remained cautious about driving bond yields too high or low. They traded in a narrow range defined by an outlook of continued modest inflation and a slow economic recovery.

The Treasury’s main 30-year bond yield rose to 6.81% from 6.78% late Thursday, pushing the price down 5/16 point, or $3.13 per $1,000 in face amount. Bond prices and yields move in opposite directions.

Prices opened higher, still buoyed by lower interest rates abroad.

But market observers said Treasuries began to lose ground after Federal Reserve Board Gov. Lawrence Lindsey commented that the economy might be in better shape than many believe.

The selloff also was propelled by profit taking after Thursday’s rally.

Also hurting bonds was the continued rise in the daily Commodity Research Bureau index, which measures prices of commodities and is considered a reliable barometer of inflation.

The federal funds rate, the interest on overnight loans between banks, was 2.875%, down from 2.938% late Thursday.

Other Markets

The dollar settled broadly lower in skittish trading on world currency markets.

In New York, the dollar closed at 116.10 Japanese yen up from 115.65 yen on Thursday. The greenback settled at 1.634 German marks, down from 1.642 marks.

Meanwhile, on the New York Commodity Exchange, gold bullion for current delivery settled at $331.90 an ounce, up $1.10 from Thursday. Silver rose 0.6 cent to $3.677 an ounce.

Light, sweet crude oil for April delivery fell 21 cents to $20.08 a barrel on the New York Merc.

Market Roundup, D4