Stocks Retreat; Dow Index Off 5.73

NEW YORK —  Stock prices retreated broadly Friday as the market calmed down after a hectic week.

The Dow Jones average of 30 industrials trimmed large losses registered early in the session and finished with a decline of 5.73 points. After encountering the 1,500-level for the first time on Thursday, the blue chip average closed out the week up 5.05 points at 1,477.18.

Trading trailed Thursday’s heavy volume. On the New York Stock Exchange, 125.54 million shares changed hands, down from 181.01 million Thursday, which was the fourth highest on record.

“We had a lot of profit taking in a continuation of the sell-off that began late yesterday,” said Charles Jensen of MKI Securities in New York.

Many analysts had been expecting sellers to step in and make the market lose some of its record-setting momentum. But there are some who say stock prices can advance further.

They base their optimism on a favorable outlook for corporate profits due to expectations that the economy will expand moderately amid continuing low inflation, falling interest rates and ample growth in the nation’s money supply.

A Labor Department report that the unemployment rate edged down to 7% in November from 7.1% in October was taken as a sign that the economy is growing at a moderate pace.

After trading closed, investors’ spirits were buoyed by reports from Washington that congressional negotiators had reached agreement on ways to reduce the federal budget deficit. The government’s massive borrowing needs are considered a serious drain on economic activity.

Leading the active list at the close was Beatrice. It closed up 3/4 at 46.

Dana was also among the volume leaders, and it ended the day down 1/8 to 27 3/4. The company said Nov. 18 that it would buy between $4 million and $6 million of its own shares to enhance stockholder equity.

Another heavily traded stock, Black & Decker, dropped 7/8 to 19. The company announced restructuring plans that include closing a power tool plant in 1987. It said it will start laying off workers at the plant next year.

Texaco was down 3/8 to 31 1/2.

Several airline stocks had losses. TWA fell 3/4 to 18 7/8 in heavy trading, UAL fell 1 1/8 to 49, Delta dropped 1 to 39 and AMR fell 5/8 to 40 3/4.

In the blue chip sector, International Business Machines rose 1 to 141 3/4 and American Telephone & Telegraph was up to 23 7/8.

In the credit markets, government and municipal bond prices rose while corporate bond prices held unchanged. Most interest rates receded slightly.

In the secondary market for Treasury securities, prices of short-term governments ended the session up 1/16 point, intermediate maturities rose 1/8 point and long-term issues rose 3/16 point.

The Merrill Lynch daily Treasury index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, edged up 0.04 to 108.62. The Shearson Lehman daily Treasury bond index, which makes a similar measurement, rose 1.20 to 1,139.77.

In corporate trading, industrials and utilities finished the day unchanged. Trading was light.

Among tax-exempt municipal bonds, revenue bonds rose 1/2 point in moderate activity and general obligations were up point in quiet trading.

The federal funds rate--the interest charged on overnight loans between banks--traded at 7.875%, compared to 8.25% late Thursday.

Yields on 30-year Treasury bonds dipped to 9.87% from 9.89% late Thursday.