The stock market closed out a week of widespread losses yesterday with a decline that pushed the Dow Jones industrial average below 900 for the first time in more than 16 months.
The Dow lost 9.24 points to close at 898.83. Wall Street brokers said the market was pressured by a combination of a jump in the major banks' prime lending rate to 6.75 per cent and anticipation that the Federal Reserve would move soon to tighten the nation's credit reins following the substantial jump in the broad money supply of $2.4 billion reported Thursday.
The market's loss for the week was 31.63 points, the second worst setback this year.
Another increase in the prime rate had been expected this week, but in the extremely thin pre-holiday trading conditions it took little to influence prices downward, a broker at Merrill Lynch, Pierce, Fenner & Smith in New York said.
Big Board volume totaled just 15.73 million shares, the second slowest pace of the year.
The composite volume of NYSE issues traded on the nation's exchanges and over-the-counter totaled 17.5 million shares.
Newton Zinder, the leading technician at E.F. Hutton's New York headquarters, said the surge in the money supply concerned brokers more acutely.
"We expect the Fed to increase the discount rate this weekend," he said. "They like to do that sort of thing over the weekend and it would realign the discount rate with the federal funds rate, which is now higher."
Zinder said the dip below 900 was not significant, since it is not a major chart point. Other brokers said the 900 level was important pyschologically, and indicated that inflation and interest rate fears had over-whelmed investor confidence in the market.
As Zinder and another chartist pointed out, however, the institutional trading that dominates the stock market is based more on chart considerations than on sentiment. "The next support level is 870-890," Zinder said. "If we fall that far, then I'll consider getting worried."
The government's report that the leading economic indicators rose 0.5 per cent in April did little to improve the market's mood.
Losing issues topped gainers by an 8 to 5 margin, with the average common share decline 22 cents.
Eastman Kodak was among the biggest losers, giving up 2 1/4 to 56 1/2. A company publication circulated yesterday said Kodak planned to reduce its work force through attrition.
Aetna Life & Casualty Co. bucked the slide, rising 1 1/2 to 34 following its announcement of an increase in its quarterly dividend from 30 to 40 cents a share.
The NYSE's composite index lost 29 to 52.76.
On the American Stock Exchange, the market index was off 25 at 112.44.
Standard & Poor's index of 400 industrials dropped 90 to 106.11, and S&P's 500-stock composite index was down 74 to 96.27.
Holly Sugar, which reduced its devidend, fell 1 1/2 to 20 3/4.
One of the few strong spots in the market was the utility group. Dow Jones average of 15 utilities managed a .06 gain to 110.17.
Prices declined in trading on the American Stock Exchange Friday.
The market value index dropped .18 to 112.51. The price of an average share lost three cents.
Volume totaled 1.98 million shares, up only slightly from 1.94 million of the previous day.