Stocks ended Friday’s session lower, but improved from their worst levels of the day, amid escalating fears of higher interest rates.
The Dow Jones average of 30 industrial stocks closed at 3,869.43, down 12.78. The index sank as much as 35 points before trimming its losses near the end of the session.
Declining issues led advancers by nearly 2 to 1 on the New York Stock Exchange. Big Board volume as of 4 p.m. was heavy at 375.34 million shares, up from 297.76 million Thursday.
Traders said the expiration of index futures contracts on Friday added to the market’s trading volume and volatility.
The sell-off began when the Commerce Department said housing starts fell an unexpectedly narrow 1 percent in December. Later, the University of Michigan said consumer sentiment has strengthened this month. And the National Association of Purchasing Management revised upward an earlier report on price gains in the last four months of 1994.
The reports came one day after the Philadelphia Federal Reserve said the area’s business activity had declined in December despite a rise in prices.
Along with Tuesday’s bullish reports on industrial production and factory use, the data heightened earlier fears that the Federal Reserve would need to raise interest rates at its policy meeting beginning Jan. 31 in order to slow the economy down.
“This hasn’t really given much solace to those who believe that the Fed should not tighten,” said Michael Metz, market strategist at Oppenheimer & Co.
Some of the stocks that moved substantially or traded heavily Friday:
Nabisco Holdings, closed at 26-7/8, up from an original offering price of $24.50.
Telefonos de Mexico’s American depositary receipts rose 3/8 to 34-7/8.
Grupo Televisa’s ADRs rose 3/8 to 23-1/8.
The American shares of Mexican companies trimmed earlier losses, along with the Mexican stock market, as the United States Congress debated providing $40 billion in loan guarantees to help Mexico out of its currency crisis.
Chrysler fell 2-1/8 to 47-1/8.
General Motors fell 3/4 to 39-1/2.
Ford fell 1-1/8 to 26-3/8.
Auto stocks sank amid fears of higher interest rates and reports of high auto inventories. In addition, GM said four of its plants were affected by a strike.
Southwest Airlines fell 1-1/4 to 18-5/8.
Goldman Sachs downgraded the airline’s stock to “market underperformer” from “market performer.”
Microsoft fell 1-7/8 to 61-5/8.
A federal judge asked the software maker and the U.S. Justice Department to defend an antitrust agreement between both parties.
Polyphase rose 3/4 to 2-7/8.
The maker of electronic components said it could not explain the decline in its stock price over the past several days. The stock fell 7/8 Thursday and has fallen a point since Jan. 10. The company said first-quarter revenues, to be reported next week, will exceed $12 million, up from $3.7 million in the year-ago quarter.