NEW YORK — A late selling wave sent the Dow Jones industrial average sharply lower Friday as a 21-year string of Thanksgiving holiday rallies was snowed under by a precipitous drop in the dollar.
The Dow Jones average fell 36.47 to 1,910.48, after Wednesday's 16.58-point drop. It fell 3.15 in the week. For the prior 21 holidays it had advanced when the Wednesday and Friday results of the Thanksgiving week were added up.
"Breaking that tradition has raised some ominous questions for next week," said market strategist Newton F. Zinder of E. F. Hutton Group Inc.
A tradition of post-holiday sluggishness remained intact, however, as volume slipped to a 1987 low. On the New York Stock Exchange, only 86.36 million shares were traded, down from 139.79 million Wednesday. It was the fewest shares traded since volume fell to 48 million in the session following Christmas Day last year.
Declines led advances 963 to 513 on the Big Board.
The selloff was attributed to the dollar's latest slump, which heightened concerns over inflation. The Commodity Research Bureau index of commodity prices, widely watched as an inflation barometer, shot higher, pushing interest rates up on credit markets.
Zinder noted that, in 33 of the past 35 years, and for 21 years straight, the day prior to and the day after Thanksgiving have combined to produce a net gain.
Statistics show that the market rises about 75% of the time before and after any major holiday. But some of the old assumptions have been challenged since the October crash.
"The action today sure makes you wonder about Monday," said Hildegard Zagorski of Prudential-Bache Securities. "We may be in for another setback, and it could be related to inflation this time."
Stock prices retreated from the opening bell, when news of the dollar's overnight weakness overseas worried investors. "Nobody is inclined to be aggressive when the dollar is down," said Laszlo Birinyi, an analyst with Salomon Bros.
The stock market decline accelerated at mid-afternoon as the Commodity Research Bureau's futures index moved sharply higher. Commodity prices and inflation are fanned by a weaker dollar.
Losses were relatively modest until a wave of selling hit in the final 15 minutes of trading on a number of small arbitrage-related sell programs, traders said. In essence, it was cheaper to buy index futures on a basket of stocks than to buy the stocks, so traders locked in profits by purchasing futures and selling stocks.
The dollar slid sharply lower in the quiet post-holiday trading, under pressure from continued concern over the U.S. budget and trade deficits, dealers said. It fell to 1.6510 West German marks from 1.6680 at Thursday's London close.
Dealers said the U.S. currency is likely soon to test historic lows, but such a move in quiet holiday trading was always unlikely. Historic lows of 1.6475 marks and 133.13 yen were reached in New York earlier this month.
Since the dollar's fall fans inflation, treasury bond prices fell sharply, with the benchmark 30-year bond down nearly a point, pushing the yield to 9.16% from 9.07% at the previous close. Yields rise as prices fall.
No major news emerged to sway the markets. But traders noted continued disappointment over the deficit-cutting agreement between White House and congressional officials. Concern was rising that the $76 billion in cuts over the next two years may be diluted as it makes its way through Congress, which must approve the pact.
Precious metal stocks advanced. ASA Ltd led the group with a gain of 4 3/4 to 55, Callahan Mining followed, up 3 5/8 to 24, Battle Mountain rose 3 to 23, Newmont Gold rose3 to 39 3/4, Hecla Mining rose 2 to 16 3/4 and Homestake Mining rose 2 to 19 7/8.
Much of the remaining activity involved Pennzoil, up 1 1/8 to 74 3/4, and Texaco, up 2 7/8 to 33 1/2. The news that Australian Robert Holmes a Court sold much of his Texaco stake to Carl C. Icahn boosted speculation that the two oil concerns would be forced to quickly resolve their long-standing legal dispute. TWA jumped 2 3/8 to 21.
Shoe-Town rose 1 to 8. It reported that an investment group is interested in buying it.