1/24/97 -- 6:21 PM

Wall Street,0606


NEW YORK (AP) - Stocks gave back another big chunk of January's rally Friday, but a potential free-fall was averted as cash-heavy money managers found the falling prices hard to resist.

The Dow Jones industrial average slid 59.27 to 6,696.48, having erased all but 10 points of a 93-point plunge only to trip again over the last hour. After four straight days of setting records, the Dow tumbled 94 points Thursday. For the week, the Dow lost 136.62 points, or 2 percent, leaving the blue-chip barometer with a gain of 248.21, or 3.8 percent, on the new year.

Broader stock measures also posted steep losses for the second straight day as bonds slid again, briefly boosting interest rates to the highest level since September.

The wave of profit-taking that sent stocks tumbling into Thursday's close continued through midday on Friday, but then eased in the afternoon as bonds began to recover. The small improvement in interest rates gave portfolio managers some confidence to invest some of the cash that continues to pour into the market from year-end contributions to retirement plans.

``We're getting some nervous selling. But the question remains, `How much money is out there?' That's been the driving force in the market,'' said Richard A. Dickson, a technical analyst at Scott & Stringfellow Inc. in Richmond, Va. ``Any sell signal we've gotten has been overwhelmed by all the money going back into the market. Buying on the dips is gospel.''

Bond prices were hurt Friday by continuing supply pressures from this week's auctions of new Treasury notes and some weakness in the dollar, which makes the payoff on U.S. securities less attractive in foreign currencies.

As bonds fell Friday, the yield on the 30-year Treasury bond - a key determinant of borrowing costs - jumped from late Thursday's 6.86 percent to as high as 6.92 percent, before easing to 6.88 percent.

``Interest-rate fears just caught up with the market,'' said Brian Belski, technical analyst at Dain Bosworth in Minneapolis. ``We haven't seen this level in interest rates in a while.''

Declining issues outnumbered advancers by a 2-to-1 margin on the New York Stock Exchange, where volume totaled 542.74 million shares as of 4 p.m. That was down from Thursday's all-time high of 683.79 million, but more than enough to set a new weekly volume mark at 2.831 billion shares, breaking the record of 2.498 billion traded July 15-19 last summer.

The Standard & Poor's 500-stock list fell 7.08 to 770.48, and the NYSE's composite index fell 3.64 to 405.51.

The Nasdaq composite index fell 14.54 to 1,363.83, and the American Stock Exchange composite index fell 1.53 to 588.16.

The Dow's biggest decliners were DuPont, down 4 7/8 to 102 5/8; Eastman Kodak, down 2 7/8 to 85 5/8; General Electric, down 2 1/4 to 101 7/8; and Philip Morris, down 1 7/8 to 115 3/4.

IBM continued to slide in the aftermath of late Tuesday's earnings report, falling 1 1/4 to 150 1/2. The computer maker's shares have dropped 17 1/2 points over the past three session.

The technology-laden Nasdaq was weighed down by Cascade Communications, which plunged 23 1/8 to 41 as late Thursday's otherwise strong earnings report spurred fears about slowing growth for the digital switching technology concern.

Overseas, Tokyo's Nikkei stock average fell 1.2 percent, Frankfurt's DAX index fell 1.2 percent and London's FT-SE 100 fell 1.2 percent.

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