Profit Taking Sends Stocks Off Broadly : Dow Drops 9.05 as Traders Cash in on Strong January Rally

NEW YORK —  Stock prices suffered their first clear-cut loss in nearly four weeks Friday as traders cashed in profits from the market’s strong January advance.

The Dow Jones average of 30 industrials dropped 9.05 to 1,277.72, cutting its gain for the week to 1.66 points.

Declines outpaced advances by slightly less than three to two on the New York Stock Exchange, ending a stretch of 19 consecutive trading days in which gainers held the edge.

The Dow Jones industrial average climbed 75.20 points, or more than 6%, in January.

Analysts said some traders evidently concluded that the market was due for a pull-back, or at least a rest period, after such an extended rally.

The market also had to digest the news of the larger-than-expected $4.7-billion jump in the basic measure of the money supply reported by the Federal Reserve after the close Thursday.

That news helped to increase conjecture that the Fed, which followed a strongly expansionary credit policy in the latter stages of 1984, might now be moving toward a more cautious approach.

Kaufman Sees Reversal

“The Federal Reserve has begun to react to the rapid growth of money that has occurred during the past few months,” said Henry Kaufman, the Salomon Bros. Inc. economist, in his weekly bulletin.

Kaufman said that action had stopped the recent decline in interest rates on federal funds--overnight loans between banks--”and the probable beginning of a reversal.”

On Friday, the Labor Department reported that the unemployment rate rose 0.2% in January to 7.4%. The increase was attributed to growth in the labor force and post-holiday layoffs.

Federal Express gained 2 3/8 to 35 7/8. On Thursday, the company said it had received more orders than expected for on-premises machines to be used in its Zap-Mail service.

Losers among the blue chips included International Business Machines, off 3/4 at 135 5/8; General Motors, down 1 1/8 at 82; Ford Motor, off 1 at 47 1/2; General Electric, off 1 at 62 7/8, and Eastman Kodak, 1 1/2 lower at 71 3/4.

Savings and loan issues, one of the strongest industry groups in January, ran into selling as enthusiasm about the interest-rate outlook waned.

Golden West Financial dropped 1 1/2 to 25 1/8; Homestead Financial fell 3/4 to 14 1/2; H. F. Ahmanson dropped 1 1/8 to 30 1/2, and Great Western Financial fell 5/8 to 27.

The NYSE’s composite index of all its listed common stocks lost 0.52 to 103.23.

Volume on the Big Board came to 105.44 million shares, down from 132.47 million Thursday.

Standard & Poor’s index of 400 industrials fell 1.10 to 199.95, and S&P;’s 500-stock composite index was down 1.00 at 178.63.

Bond prices fell, extending losses to a third straight day. Trading was moderate.

Yields on 30-year Treasury bonds climbed to 11.34% from 11.23% on Thursday. On Tuesday, yields on the bellwether issue for such long-term borrowing costs as mortgage interest rates had slipped to 11.11%, the lowest level since mid-1983.

The federal funds rate, which slipped below 8% in December and which traded below 8.25% for much of January, finished the week at 8.5625%, against 8.75% late Thursday.

In the secondary market for Treasury bonds, prices of short-term governments fell 1/8 point, intermediate maturities fell 1/2 point to 3/4 point and long-term issues were down 5/8 point to 7/8 point, according to Salomon Bros.

In corporate trading, industrials and utilities fell 1/2 point.

Among tax-exempt municipal bonds, general obligations and revenue bonds were down 1/2 point.

Yields on three-month Treasury bills rose 19 basis points to 8.29%. Six-month bills rose 11 basis points to 8.30% and one-year bills were up 5 basis points at 8.50%.