Market Pauses Before Holiday; Dow Gains 3.68

Blue chip stocks edged higher Friday on the eve of the long holiday weekend, in the thinnest trading since December. For the week, the Dow industrials were off 9.21 points at 3,757.14. They gained 3.68 in the session.

The stock and bond markets shrugged off Federal Reserve Board Chairman Alan Greenspan’s Senate testimony, in which he said the economy is basically strong but that there are uncertainties, such as the weak dollar.

Treasury bond yields rose after the Commerce Department revised upward its estimate of the nation’s gross domestic product, from 2.6% to 3% in the first three months of the year. That is much slower than the 7% rise in the fourth quarter of 1993, but economists had expected the revised number to be lower, not higher, and it signaled that the economy is stronger than thought and inflation a greater risk.

But an inflation index tied to the GDP proved tame. It rose at a moderate annual rate of 2.6% in the first quarter, unchanged from an earlier estimate.

Steven R. Ricchiuto, chief economist for Barclays de Zoete Wedd Government Securities Inc., said Greenspan’s testimony gave the market the impression that the Fed won’t move again in the near future to raise interest rates, suggesting that the central bank is sanguine about the long-term inflation outlook.

The Treasury bond market closed early for the holiday. The benchmark 30-year bond’s yield closed at 7.38%, up from 7.36%.

Some analysts await the government’s release Tuesday of data on personal income and spending in April, which will provide a better picture of second-quarter growth and inflation.

In London, the main British share index plunged to a nine-month low on fears of higher interest rates because of faster economic growth in Europe and the United States. The FTSE-100 fell 53.3 points to 2966.4, down 4.9% on the week. British Telecom, British Petroleum and British Gas together wiped about 10 points off the index.

Although the German market rose slightly Friday, European markets overall fell through the week.

The dollar ended mostly lower in foreign exchange trading, while gold prices were higher.

Prices of many commodities staged modest rebounds after a week that saw a closely watched index climb to 3 1/2-year highs before plunging sharply.

Grains, coffee, cocoa, metals, oil and cattle prices all recovered some of their lost ground.

Coffee prices, which tumbled 15% from Monday’s close of $1.39 a pound to $1.17 on Thursday, rebounded 3.5 cents to close at $1.213.

Among market highlights:

The blue chips received a boost from McDonald’s, which rose 1 1/8 to 61 after the restaurant chain’s board approved a 2-for-1 stock split and raised its quarterly dividend.

Philip Morris fell another 5/8 to 50. The stock fell 3 1/8 on Thursday after the company said it had no immediate plans to split its food and tobacco businesses.

Steel stocks rose. A Wall Street Journal article said the outlook for steel profits is good and the stocks cheap, having lost more than 20% since Jan. 31. Bethlehem Steel rose 1 1/8 to 19 5/8.

McKesson gained 3 3/8 to 84 3/4 on speculation that it may be acquired soon by either Glaxo Holdings or by Johnson & Johnson in a deal with Glaxo.

Market Roundup, D2