Holiday Fever Slows Market; Dow Loses 6.04

The stock market, in the grip of holiday fever, ended with small losses Friday in light trading.

The Dow Jones average of 30 industrials dropped 6.04 to 3,043.60, finishing the week with a net gain of 3.35 points.

Advancing issues slightly outnumbered 791 to 741 on the New York Stock Exchange. Big Board volume came to an estimated 143.44 million shares, down from 154.15 million Thursday.

Weakness in the bond market lent a negative tone to stocks and many investors were unwilling to take on large positions ahead of the three-day weekend.

U.S. markets are closed Monday for Labor Day.

“The (stock) market was active the first hour of the day, but by midday, most traders had unwound positions and flattened out before leaving for the long holiday weekend,” said Richard Meyer, managing director in institutional trading at Ladenburg Thalmann.

“A lack of bids is probably why this market is down rather than any fundamentals,” he added. Continuing developments in the Soviet Union may have also tempered activity, analysts said.

“I think you’ve got a great reluctance to embark on any major accumulation programs with the situation in Eastern Europe,” said Robert Stovall, president of Stovall/21st Advisers.

Robert Caputo, director of research at Swiss Bank Corp. said the market may also be pausing because of uncertainty about the Federal Reserve’s credit policy.

“The economic signals are getting mixed. That may mean the market is getting disappointed on the timing of a discount rate cut,” he said.

In economic data released Friday, the July leading indicators rose a surprising 1.2%, and orders received by factories in July jumped 6.2%, the biggest monthly rise in more than 20 years.

In addition, a survey of Chicago-area purchasing managers pointed to a stronger economic outlook.

On Thursday, the government reported that new jobless claims fell in the week ended Aug. 17, but were still higher than the preceding four weeks. Personal income slipped 0.1% in July and single-family home sales fell 8.5% last month, government agencies said.

Among the market highlights:

* Advanced Micro Devices topped the volume list on the NYSE, gaining 1/4 to 12 3/8 on more than 10.2 million shares. Siemens AG, which had previously said it would divest its 8.2 million share stake in AMD, found a buyer and sold its shares.

* Syntex dropped 3 to 44 3/4, partly on news that the Food and Drug Administration is challenging two of its advertising campaigns.

* Oregon Steel tumbled 4 1/4 to 29 1/4 after it said its third-quarter earnings would fall below analysts’ estimates. Merrill Lynch trimmed its 1991 earnings projection.

* General Dynamics shares gained 1 1/2 to 42 1/2. Paine Webber repeated an attractive rating on the company, saying it expects the company to outperform most Wall Street 1992 estimates.

* Lockheed, which also lost ground after the failed Soviet coup, rebounded 1 1/8 to 42 3/4.

* Shares of Intel Corp. slipped 1 3/4 to 49 1/2. Donaldson Lufkin issued cautionary comments on the company, noting that steep competition for its state-of-the-art 486 microprocessor is likely to emerge soon.

* Coca-Cola Enterprises, which is considering an acquisition of Johnston Coca-Cola Bottling, rose 1/2 to 15 1/8.

Stocks ended higher in Tokyo on hopes for looser credit. The 225-share Nikkei average rose 333.70 points to 22,335.87. London stocks jumped to record highs for the second time in a week. The Financial Times 100-share average closed up 7.5 points at 2,645.7. German shares ended slightly lower in quiet trading. The 30-share DAX average in Frankfurt fell 5 points to 1,650.50.

Credit

Treasury bond prices fell in a shortened, pre-holiday session after the release of the government reports that gave economists optimism about the economy.

The price of the benchmark 30-year bond fell 5/8 point, or $6.25 per $1,000 in face amount. Its yield, which rises when the price falls, climbed to 8.06% from 8% late Thursday.

The price decline followed three days of rising prices that came on government reports that appeared to indicate the economic recovery may be faltering.

William V. Sullivan, director of money market research at Dean Witter Reynolds Inc., said the price decline Friday was directly attributable to the reports, which indicated that the economy was recovering.

Such reports usually depress bond prices because they make it less likely the Federal Reserve will ease interest rates. Lower rates benefit fixed-return securities such as bonds.

The federal funds rate, the interest on overnight loans between banks, was trading at 5.438%, up from 5.375% late Thursday.

In the tax-exempt market, the Bond Buyer index of 40 actively traded municipal bonds closed at 93 7/8, down 1/16 point from late Thursday. The average yield to maturity remained at 6.97% due to rounding.

Currency

The dollar headed higher in response to the positive economic reports, surprising some traders who had expected uneventful pre-holiday activity.

The dollar gained against all major currencies except the Japanese yen. The reports seemed to indicate the recovery was back on track, easing fears that the economy might be slipping back into recession.

“People were looking for a quiet day, but we saw the dollar come up fairly surprisingly,” said Bob Morrissey, a senior trader for the Bank of Boston.

The dollar closed in New York at 136.83 yen, down from late Thursday’s 137.15 yen.

Against the German mark, it closed at 1.747 German marks, up from 1.744 marks on Thursday.

Sterling settled at $1.681, less expensive than late Thursday’s $1.684.

Still, volume largely subsided by early afternoon as participants headed home for the three-day Labor Day weekend.

Other late New York dollar quotes, compared to Thursday’s prices, included: 1.5264 Swiss francs, up from 1.524; 5.933 French francs, up from 5.920; 1,302.75 Italian lire, up from 1,301.50, and 1.142 Canadian dollars, up from 1.141.

Commodities

Grain and soybean futures prices climbed on the Chicago Board of Trade after a company report predicted lower crop yields than what the federal government has estimated.

On other commodity markets, energy futures gained; precious metals slipped, and meat and livestock futures were mostly higher.

September wheat futures settled 6 cents higher at $3.105 a bushel; September corn settled 2 cents higher at $2.49 a bushel; September oats were 3.50 cents higher at $1.25 a bushel; September soybeans were 10.75 cents higher at $5.793 a bushel.

Energy futures on the New York Mercantile Exchange gained on rumors that the Soviet Union and Iran were about to decrease exports to Europe. October light sweet crude was 29 cents higher at $22.26 a barrel.

Precious metals futures on New York’s Commodity Exchange continue to be hampered by fears of a massive Soviet gold selloff. September gold was $2.80 lower at $348.10 an ounce; September silver was 1.5 cents lower at $3.81 an ounce.