FINANCIAL MARKETS : Market Takes Wild Ride; Dow Trims Loss to 12.79

Blue chip stocks fell in volatile trading Friday as stock and index options expired, while the dollar rose on the government’s report of an improvement in America’s trade deficit with Japan.

The Dow Jones industrial average lost as much as 41 points on interest rate worries, but trimmed its losses in a burst of late buying tied to expirations of futures contracts. The blue-chip average closed at 3,815.26, down 12.79 points on the day, but up 13.79 points for the week.

Declining issues beat advancers by about 9 to 5 on the New York Stock Exchange, where 362.72 million shares changed hands, up from 323.21 million on Thursday.

Analysts said the market’s volatility stemmed from the double expiration of index and individual options, but the “double witching” did not overshadow the sour mood of investors, who were still hounded by this week’s interest rate hike by the Federal Reserve.

Wall Street has been struggling to find its bearings since the Fed tightened short-term interest rates on Tuesday for the sixth time this year in an effort to slow the economy and curb inflationary pressures.

The Fed increased the discount rate it charges banks for loans to 4.75% and boosted the federal funds rate, the rate banks charge each other for money, to 5.5%.

Among the market’s weak spots were interest rate-sensitive bank stocks and shares in companies seen as sensitive to any economic slowdown resulting from the higher interest rates.

Currency markets focused on the drop in the U.S. trade imbalance with Japan to $5.73 billion from $5.80 billion in August, even though the overall deficit widened to $10.13 billion from $9.68 billion.

In New York, the dollar closed at 98.53 Japanese yen and 1.555 German marks, up from 98.35 yen and 1.551 marks late Thursday.

The benchmark 30-year Treasury bond yield slipped to 8.12% from Thursday’s at 8.13%. Its price, which moves in the opposite direction, finished with a gain of 1/16 point, or around 63 cents per $1,000 in face value.

Prices of other Treasury issues were unchanged to slightly lower.

Among the market highlights:

* Banking and financial stocks fell as analysts said higher rates would squeeze lending margins. On the Big Board, Citicorp fell 5/8 to 43 3/8 and BankAmerica lost 1 to 39 3/8. Bankers Trust lost 1 3/4 to 56 3/4, after a Wall Street Journal article suggested the stock could fall further on the bank’s derivative investment problems.

* Goodyear Tire & Rubber dropped 1 to 33 3/4 and Whirlpool Corp. gave back 7/8 to 50 5/8.

* Sporting goods retailer Sports Authority, a Kmart Corp. unit, jumped 5 to 24 from its offering price of 19.

* Shiva Corp., an off-site computer networking company, surged 16 1/2 from its starting price at 15.

* Synergen Inc. gained 3 21/32 to 9 1/32 on news that it agreed to be acquired by Amgen Inc. for $9.25 per share. Amgen lost 3/16 to 56 7/8.

* Informix Corp. rose 1 13/16 to 29 1/16 after SoundView Financial Group upgraded its rating on the stock to buy from hold and raised its 1995 earnings estimates on the company.

Broad-market indexes also retreated. The NYSE’s composite index fell 1.19 points to 252.30. The Standard & Poor’s 500-stock index slid 2.09 points to 461.47 and the Nasdaq composite index lost 1.17 points to 764.67.

Overseas stock markets were mixed. Tokyo’s Nikkei 225-share average ended down 34.01 points to 19,302.56. In Europe, the Frankfurt DAX 30-share average ended fractionally lower at 2,100.23, while London’s Financial Times 100-share average closed up 3.5 points at 3,131.0.

Mexico’s Bolsa index plunged 36.10 points to close at 2429.11.