Dow Sinks 36.79 as Market Takes Sharpest Decline in 2 Months; Bonds Also Slide

NEW YORK —  Stock prices took their sharpest drop in more than two months Friday, yielding to profit takers after the market’s rise to record highs earlier in the week.

Bond prices also took one of their biggest tumbles in months, with the bellwether 30-year Treasury bond falling just over 1 point, or more than $10 per $1,000 in face value, with its yield surging to 7.65% from 7.55% late Thursday.

The Dow Jones average of 30 industrials fell 36.79 to 2,335.80 for its biggest drop since it lost 44.15 points on Jan. 23. That left the average with a net gain of 2.28 points for the week.

Volume on the New York Stock Exchange came to 184.40 million shares, against 196.04 million in the previous session.

Analysts attributed the slide to an outbreak of profit taking after the market’s dramatic advance over the past three months.

Brokers noted that the bond market has been flat and sluggish lately, leaving stocks without the support of declining interest rates.

Borg-Warner led the active list, up 3 1/8 at 44 in trading that included a 10.07 million-share block at 40 1/8. GAF said it bought 9.1 million Borg-Warner shares, increasing its stake in the company to just under 20%.

Irwin L. Jacobs, a Minneapolis investor, confirmed that he was the seller in the big trade.

Conrail Unchanged

Consolidated Rail Corp. was actively traded, unchanged at 30 3/4. The stock made its debut Thursday on heavy volume after a public offering at $28, the largest stock offering in U.S. history.

Standard Oil dropped 1 to 70 3/8 after jumping 6 1/2 points Thursday, when British Petroleum said it would offer $70 each for all the Standard Oil shares it doesn’t already own.

Pharmaceutical stocks, which have enjoyed big gains in recent weeks, were a prime target of profit takers. Abbott Laboratories fell 3 3/8 to 61 5/8, Schering Plough dropped 5 to 94 3/8, Eli Lilly declined 4 to 95, Upjohn fell 4 to 122 and Merck dropped 4 to 158 7/8.

Precious-metals issues gained ground as the price of gold climbed $11.20 an ounce to $422.70 on the Commodity Exchange in New York. ASA Ltd. rose 4 3/4 to 61 3/4 and Campbell Red Lake Mines advanced 2 1/8 to 29 5/8.

Decliners Lead Gainers, 5-2

Declining issues outnumbered advances by about five to two on the NYSE, with 451 up, 1,124 down and 394 unchanged.

Large blocks of 10,000 or more shares traded on the NYSE totaled 3,377, compared to Thursday’s 3,924.

In the bond market, a key factor in the slide--which followed moderate price gains on Thursday--was the dollar’s drop in defiance of repeated intervention by the central banks of the United States, Japan, West Germany and other nations.

The dollar fell to 147.20 yen in New York late Friday from 149.48 yen the previous day, levels not seen since the late 1940s.

In the secondary market for Treasury bonds, prices of short-term government securities fell in the range of 1/8 point to 7/32 of a point, intermediate government securities ranged from 11/32 point to 13/16 point lower and 20-year issues dropped 1 13/32 point, according to figures provided by the financial information service Telerate Systems Inc.

In corporate trading, industrials were down 1/8 point in light trading and utilities fell point in quiet trading, the investment firm Salomon Bros. Inc. said.

Among tax-exempt municipal bonds, general obligations were down 1/8 point and revenue bonds fell point in light trading.

Yields on three-month Treasury bills rose 7 basis points to 5.63%, six-month bills were up 8 basis points to 5.67% and one-year bills rose 9 basis points to 5.78%, according to Telerate. A basis point is one hundredth of a percentage point.

The federal funds rate, the interest on overnight loans between banks, was quoted at 6.125%, unchanged from Thursday.