Stocks Finish Lower After Seesaw Session

Stocks ended sharply lower Friday after being whipsawed by a series of computerized program trades that sent blue-chips to their third straight loss.

As fears of rising interest rates mounted, the Dow Jones industrial average fell 59.27 points to end the week at 6,696.48, down nearly 200 points from its record close of 6,883.90 Tuesday.

The index was off 136.62 points since last Friday, making it the first full week this year in which it lost ground.

Broader indicators mirrored the Dow’s decline and a number of analysts said the retreat by stocks is looking more and more like the start of a corrective phase for the market.

Investors also grew more concerned about interest rates, which edged still higher as the yield on the benchmark 30-year U.S. Treasury bond rose to 6.88% from 6.86% at Thursday’s close.

Bond prices were hurt Friday by continuing supply pressures from this week’s auctions of new Treasury notes and some weakness in the dollar, which makes the payoff on U.S. securities less attractive in foreign currencies.

In contrast with Thursday, when stocks met with a sudden and sharp wave of program selling at the end of the day, Friday’s session was marked by sweeping advances and declines of up to 90 points.

Declining issues outnumbered advancers by a 2-1 margin on the New York Stock Exchange in heavy trading.

The Standard & Poor’s 500-stock list fell 7.04 points to 770.52, the NYSE’s composite index fell 3.64 points to 405.51 and the Nasdaq composite index fell 14.54 points to 1,363.83.

The Russell 2,000 index of smaller shares fell 2.32 points to 368.14 and was little changed for the week.

Several times during the day, buy programs lifted the Dow up from its lows, as fund managers put to work the vast amounts of retirement account cash still at their disposal.

Even as the fund money was providing something of a safety net for stocks, some analysts were mulling the prudence of buying at these near-record levels, even on dips.

“This is very different because for the first time in the last five years, the market has become overvalued,” said Hugh Johnson, chief investment officer at First Albany.

Among Friday’s highlights:

* The impact of falling bond prices affected financial and transportation stocks, which are particularly sensitive to fluctuations in interest rates.

Among major banks, Citicorp slid 3 3/8 to 109 3/8, BankAmerica fell 3 1/8 to 105 1/8 and Chase Manhattan shed 2 to 89 1/8.

American Airlines parent AMR fell 1 1/8 to 84 1/2 and Delta Air Lines dipped 1 1/4 to 81 1/8.

* Companies with a large portion of sales outside the U.S. slumped as the dollar held near four-year highs against the Japanese yen. Dow components DuPont fell 4 7/8 to 102 5/8; Eastman Kodak dropped 2 7/8 to 85 5/8; General Electric declined 2 1/4 to 101 7/8; and Philip Morris slipped 1 7/8 to 115 3/4.

The dollar rose above 120 yen for the first time in about four years, only to tumble after a report that the Bank of Japan bought yen for dollars. It closed at 119.00 yen in New York, down from 119.47 yen Thursday.

* IBM continued to slide in the aftermath of late Tuesday’s earnings report, falling 1 1/4 to 150 1/2. The computer maker’s shares have dropped 17 1/2 points over the last three sessions.

* Many technology stocks also suffered losses. Leading the decline was Cascade Communications, which plummeted 23 1/8 to 41 as late Thursday’s otherwise strong earnings report spurred fears about slowing growth. And XLConnect crumpled 14 7/8 to 8 3/4 after it warned of lower fourth-quarter profit.

The concern spilled over to other networking equipment shares. Cisco Systems fell 3 1/8 to 68 5/8 and Lucent Technologies retreated 2 7/8 to 53 1/8.

* GM was among the 10 Dow stocks that gained, rising 5/8 to 62 1/2. Analysts said GM’s board could boost its quarterly dividend Monday and approve a stock buyback program.

* PepsiCo fell 1 5/8 to 33 7/8 after confirming late Thursday that it will spin off its restaurant businesses.

Overseas, Tokyo’s Nikkei stock average fell 1.2%, Frankfurt’s DAX index fell 1.2% and London’s FTSE-100 fell 1.2%.

Market Roundup, D4