NEW YORK — News that the New York Stock Exchange will allow the full return of program trading unnerved an advancing stock market late Friday and dropped the Dow Jones industrial average 26.36 points to a closing 1,959.05.
The Dow, up 11 points at 2 p.m., slid 36 points in the last hour of trading in a selloff that was also fed by worries over a weak bond market, the continuing decline of the dollar and the uncertain future of efforts to cut the federal deficit.
Still, advancing issues outnumbered declining stocks by a narrow margin on the New York Stock Exchange, while the American Stock Exchange and over-the-counter markets ground out small gains for the day.
Analysts said the market showed notable stability for the week as a whole, in the face of heavy volume and volatility in the currency and bond markets. The stock market also seemed to resist unsettling international economic news that might have set back its post-crash recovery, they said.
Trading volume on the NYSE totaled 228.29 million shares on Friday, compared to 225.96 million on Thursday.
The Dow declined 34.48 points, or 1.7%, in the trading week. Average daily volume on the New York Stock Exchange for the week was 212 million shares, compared to 282 million shares the previous week and 416 million shares in the first week after the Oct. 19 crash.
The New York Stock Exchange said that, beginning Monday, it will again allow member firms to execute so-called program trades through direct links to its high-speed computerized order delivery system. Firms have been able to carry out such trades manually in recent days, but execution is slow and has limited their reliance on the trading techniques.
Critics have held program trading partly responsible for the 508-point drop Oct. 19, and the market took the news "as a negative," said Alfred Goldman, chief technical analyst at A. G. Edwards & Sons in St. Louis. "There was the feeling, 'here we go again.' "
Earlier this week, the Big Board withdrew its request that member firms refrain from any program trades for their own accounts. Richard Torrenzano, an exchange vice president, said it was "too early to say" whether withdrawing of that request had increased market volatility in the past several sessions.
One market analyst, Michael Metz of Oppenheimer & Co. in New York, asserted that the easing of Big Board restrictions has already had an effect in exaggerating intraday price swings, including Friday's 11th-hour decline.
Torrenzano also said the exchange will continue its curtailed hours next Monday through Wednesday. The exchange will close at 3:30 p.m. EST on those days, rather than 4 p.m., and will consider next week whether to return to the normal schedule on Thursday.
The exchange "feels it is prudent to take a slow approach to returning to normal hours to ensure the smooth processing of orders," Torrenzano said.
Prices Lower in Tokyo
Despite the market's creditable showing last week, several market professionals voiced fears about how well the market will be able to hold up against the continuing fall of the dollar. "The market has been living in a fool's paradise these past few days," said Thom R. Brown, chairman of the investment committee of Butcher & Singer in Philadelphia. He said the market has been sustained in recent days by bargain hunting by American investors among blue chip stocks.
But foreign investors, now so important to the market's health, "can only be scared when they hear our Treasury secretary say it's OK to abandon the dollar," he said.
Brown cited a danger that "they're all going to head for the exits at once. I haven't seen any buy orders from my European clients for a while, and I suspect I'm not the only one."
The Dow crossed the 2,000-point mark three times during the day but fell back each time.
Bond prices were down again on news of an unexpected gain in non-farm employment last month and further weakness in the dollar.
Analysts said that, for the week, the strongest stocks tended to be those of multinational companies that would benefit from a weaker dollar as well as utilities and companies such as food and drug concerns that would presumably hold up well in a weaker economy.
Semiconductor stocks declined Friday following unfavorable research reports from Merrill Lynch and First Boston. Texas Instruments lost 6 to 45, Motorola fell 1 3/4 to 44, National Semiconductor dropped 7/8 to 12 1/8 and Teradyne retreated 1 3/8 to 17.
International Business Machines dropped 4 to 119 1/2, while Merck lost 4 to 179.
Woolworth, which posted a 10.1% sales gain in October, climbed 2 to 34 5/8. Sears was unchanged at 35 3/4, and K mart lost 1/8 to 29 3/8.
USX was up 1/2 to 28 3/8 after Chairman David M. Roderick said the company may consider raising its dividend and making "additions to our asset base" because of expected excess cash flow.
Financial Corp. of America was up 5/8 to 2 3/8. Greyhound's stock added 7/8 to 25 as Bear, Stearns & Co. said it was initiating coverage of the company and published a favorable recommendation.