Profit Taking Pushes Dow Down 30 : Market Overview

* Stock prices plummeted as sellers regained control of the market, and profit taking and losses in financial and medical services stocks carved nearly 1% off the Dow Jones average.

* Long-term bond yields were driven lower by reports confirming expectations of continued low inflation and residual demand from Thursday’s strong sale of 30-year bonds.

* The dollar was mixed in trading against major currencies, rising against the German mark and Japanese yen amid positive economic news.

Stocks

With a three-day weekend ahead, traders were reluctant to carry heavy positions. U.S. financial markets will be closed Monday for Presidents’ Day.

The Dow dropped 30.26 points to 3,392.43, extending its loss for the week to 49.71 points.

In the broader market, declining issues outnumbered those advancing by about 8 to 5 on the New York Stock Exchange. Big Board volume came to 216.81 million shares, against 257.19 million in the previous session.

The Labor Department reported that the producer price index of finished goods rose 0.2% in January, while the “core” index, which excludes food and energy prices, rose 0.4%.

The government also said business sales jumped 1.9% in December, the largest gain in more than two years. The increase outpaced a 0.4% rise in inventories.

The increase in the core rate was a bit bigger than some observers had expected.

Among the market highlights:

* Student Loan Marketing Assn., widely known as Sallie Mae, fell 5 1/4 to 57 7/8. The stock has been buffeted lately by talk that Clinton will proceed with a plan for direct student loans from the government in place of the current program.

Stocks of health management organization operators declined sharply amid concern over their prospects under Clinton’s drive for health care reform.

* Foundation Health fell 5 1/2 to 33 5/8; Wellpoint Health Networks dropped 3 1/8 to 33 1/4; United Healthcare lost 6 to 55 7/8; United American Healthcare fell to 16 1/2, and U.S. Healthcare, traded on the NASDAQ, lost 4 1/8 to 48 3/8.

* Sears, Roebuck climbed 1 1/8 to 52 5/8 on top of a 1 1/2-point gain Thursday, when Sears officials said the company’s restructuring and upgrading program was on track to reduce debt and improve cash flow.

* But many other blue chip industrials ran into selling. Allied-Signal fell 1 7/8 to 64 5/8; General Electric closed off 1 3/8 to 85; DuPont dropped 3/4 to 48 1/2; Aluminum Co. of America fell 1 1/8 to 74, and International Business Machines lost 3/8 to 50 3/4.

* Energy stocks were broadly lower as well. Chevron dropped 1 5/8 to 75 1/8; Exxon fell 5/8 to 61 3/4; Texaco fell 1 1/4 to 61; Mobil fell 1 1/8 to 64 7/8; Amoco lost 3/4 to 53 5/8, and Atlantic Richfield fell 1/4 to 117 3/8.

* Medtronic, which reported higher quarterly profit and said it received Food and Drug Administration approval for its implantable defibrillator, jumped 8 5/8 to 90 7/8.

* Dataram, traded on the American Stock Exchange, fell 2 1/2 to 8 1/4. Earnings for the fiscal third quarter ended Jan. 31 came to 16 cents a share, down from 25 cents a share in the comparable period a year earlier.

Stocks closed mixed in overseas trading. In Tokyo, stocks ended lower with the Nikkei average dropping 238.39 points, or 1.39%, to 16,851.51, closing below 17,000 for the first time since Jan. 27. Over the week the index lost 481.39. On the London stock exchange, the Financial Times 100-share average closed off the day’s highs at 2,843.0, and Frankfurt’s 30-share DAX average closed at 1,661.43, up 10.38 points from Thursday.

Credit

The yield on the 30-year Treasury bond fell to its lowest level in nearly seven years, sending prices higher. The key bond’s yield declined to 7.12%. The yield on the bond was down from 7.22% at auction and 7.15% in post-auction trading Thursday. Its price rose 3/8 point, or $3.75 per $1,000 in face amount. Bond prices and yields move in opposite directions.

Analysts said the market appeared to be driven by the Labor Department’s producer price report and continued demand from Thursday’s strong sale of $9.25 billion worth of 30-year bonds.

In addition to more than $35.5 billion in new securities from the Treasury’s quarterly refunding, the market this week digested a huge supply of municipal and corporate bonds, including Goldman Sachs’ $1.5-billion offering of five-year Ford Motor Co. bonds.

The federal funds rate, the interest on overnight loans between banks, was 3%, unchanged from Thursday.

Other Markets

Zlatko Glamuzina, chief currency dealer at Banco di Sicilia, said the positive economic reports drove the dollar higher against the mark as the trading day progressed.

Some analysts contend that the difference could portend higher production and job growth.

In New York, the dollar closed at 120.65 Japanese yen, up from 121.175 yen late Thursday.

The greenback rose to 1.659 German marks, up from 1.658 marks the day before.

Meanwhile, in the commodities markets, crude oil and other energy futures fell on the New York Mercantile Exchange, with light, sweet crude oil sinking 28 cents to $19.98 a barrel.

Precious metals weakened on New York’s Commodity Exchange on continued selling after a strong rally Wednesday. February gold dropped $2.60 to $329.60 an ounce, and March silver sank 6.5 cents to $3.692 an ounce.

Market Roundup, D6