NEW YORK — The stock market ran up its sharpest gain in more than three weeks Friday, continuing the rally of the past two sessions despite adverse news on the trade deficit.
The Dow Jones average of 30 industrials climbed 32.69 points to 2,608.74, finishing the week with a net gain of 47.36 points.
Volume on the New York Stock Exchange came to 178.02 million shares, against 179.79 million in the previous session.
Before the market opened, the Commerce Department reported that the nation's trade deficit reached a record in July, with imports exceeding exports by $16.47 billion.
The news sent the dollar and bond prices slumping in early trading. But both began to recover quickly as the morning passed.
Even at the outset, the stock market absorbed the trade news smoothly. Analysts noted that the market had several days to anticipate a poor trade figure, and said it appeared investors were happy just to have the report out of the way.
Much of the July increase was concentrated in oil, and a better showing in that sector may be looming in August, the investment firm of Smith Barney, Harris Upham & Co. said in a bulletin to its customers.
"Evidence is mounting that deficits with our major trading partners may be diminishing," the firm concluded.
Carter Hawley Hale Stores, on its first day of official trading as a restructured company, closed down at 15 3/4. Neiman-Marcus Group, the new company comprising Carter Hawley's spun-off specialty stores, rose 3/4 to 42 3/4.
Eastman Kodak rose 1 3/4 to 101 1/2 in active trading. The company declared a 50% stock dividend, the equivalent of a 3-for-2 split, and raised its quarterly cash payout.
In the credit markets, bond prices jumped higher Friday despite more bad news about the nation's widening trade deficit.
Bond market analysts said buying picked up quickly as traders digested the figures and decided much of the negative news about trade had already been figured into prices.
The Treasury's key 30-year issue was up 21/32 point in late trading, or about $6.50 for every $1,000 in face amount. The yield on the bond, which moves in the opposite direction of its price, dipped to 9.49% from 9.57% Thursday.
In the secondary market for Treasury bonds, prices of short-term governments were up 3/32 point, intermediate maturities rose 3/32 point to point and 20-year issues were up 7/8 point, according to Telerate Inc., a financial information service.
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 and utilities were up 1/2 point in active trading, according to the investment firm Salomon Bros.
Among tax-exempt municipal bonds, general obligations rose point and revenue bonds gained 3/4 point in moderate dealings, Salomon Bros. said.
Yields on three-month Treasury bills, meanwhile, rose 4 basis points to 6.35%. A basis point is one-hundredth of a percentage point. Six-month bills were up 5 basis points to 6.38% and one-year bills were up 3 basis points at 7.09%.
The federal funds rate, the interest on overnight loans between banks, was quoted at 7.125%, unchanged from Thursday.