NEW YORK — The stock market declined slightly Friday, still feeling some of the aftershocks of its sell-off earlier in the week.
The Dow Jones average of 30 industrial stocks, down 47.48 points Wednesday and Thursday, dropped another 4.70 to 1,513.53. The average's loss for the week was 35.67 points.
Analysts said it might take more time for the market to recover its balance after the sudden pessimistic swing this week in expectations about interest rates.
Signs of a strengthening economy sent interest rates sharply higher Wednesday and chilled lingering hope that the Federal Reserve might cut the discount rate.
Interest Rates Climb
Interest rates rose in late activity Friday in the credit markets. Analysts blamed uncertainty over whether the Gramm-Rudman bill, which mandates a stage-by-stage reduction of the federal deficit to zero by 1991, will be deemed constitutional.
Nevertheless, it appeared that the stock market attracted some buyers who had been waiting for a "correction" to buy stocks at prices below their all-time highs.
In the daily tally on the Big Board, declining issues slightly outnumbered advances.
Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 146.11 million shares.
Large blocks of 10,000 or more shares traded on the NYSE totaled 2,365, compared to 3,204 Thursday.
Standard & Poor's index of 400 industrials lost 0.26 to 228.46, and S&P's 500-stock composite index was down 0.15 at 205.96.
Rumors that Merrill Lynch is about to be bought sent the stock of the brokerage and financial company up for a second consecutive day despite a statement from Chairman and Chief Executive William A. Schreyer that he knows of "no basis whatsoever to any rumors" that the firm is to be acquired.
Merrill Lynch's stock declined 7/8 at 37 1/8. It had risen 2 3/4 to 38 on Thursday.
Schreyer said the company had asked the Securities and Exchange Commission and the major trading exchanges to investigate recent trading in the company's stock. A spokesman for the NYSE said it had begun analyzing the trading.
Among the rumored acquirers who have denied that they are interested in buying the company are arbitrageur Ivan F. Boesky, Aetna Life & Casualty, IBM and General Motors.
The only company mentioned as a possible buyer that has not denied the rumors is Citicorp, the nation's largest bank holding company.
GATX jumped 3 1/2 to 38 3/8. Leucadia National Group and affiliates said Thursday that they had effectively acquired a 5.26% interest in GATX and might seek to gain control of the company.
Among actively traded blue chips, Ford Motor rose 5/8 to 55 5/8, but International Business Machines dropped 1 7/8 to 148 1/2 and American Telephone & Telegraph lost 1/8 to 23 3/4.
Comdisco was the day's biggest percentage loser, falling 6 1/2 to 20 3/8. The Internal Revenue Service sought to assess the company $200 million in what it interpreted as back taxes due. Comdisco said it has gone to the Tax Court to contest the point.
Good news on inflation failed to prevent another sell-off in the credit markets.
Bond prices rose early in the day, raising hopes of stability, but then dropped sharply in the final hour of trading.
The yield on the benchmark 30-year Treasury bond climbed past the psychologically important level of 9.5% to 9.58%, up from 9.46% late in Thursday's session.
Traders showed little enthusiasm over a Labor Department report saying that wholesale prices rose 1.8% in 1985, giving the nation its lowest three-year wholesale inflation rate in 20 years. Ordinarily news of low inflation stimulates the bond market.
In the secondary market for Treasury securities, prices of short-term governments fell from 7/32 point to 3/8 point, intermediate maturities fell from 1/2 point to 31/32 point and long-term issues were down 1 9/32 to 1 3/32 points, according to the investment firm of Salomon Bros. The movement of a point is equivalent to a change of $10 in the price of a bond with a $1,000 face value.
In corporate trading, industrials fell 1 point in active trading and utilities fell 1 point in moderate dealings.
Among tax-exempt municipal bonds, revenue bonds were off one point in moderate activity and general obligations were down in light trading.
Yields on three-month Treasury bills rose six basis points to 7.26%. Six-month bills rose seven basis points at 7.37% and one-year bills rose 12 basis points to 7.43%. A basis point is one-hundredth of a percentage point.
The federal funds rate--the interest on overnight loans between banks--traded at 7.813%, compared to 8% late Thursday.