Stocks pulled back in heavy trading Friday as many investors continued taking profits from last week's big gains, while others reduced their positions ahead of a long weekend.

Markets will be closed Monday in observance of Presidents Day.The Dow Jones industrial average, which rebounded 10.27 points Thursday, retreated 30.26 points to 3392.43.

Putting a drag on the key barometer was the sharp loss in Dow component Allied-Signal, which was down 23/8 to 641/2 in ex-dividend trading.

Among the broad gauges, the New York Stock Exchange composite index fell 1.42 to 245.30, while Standard & Poor's 500-stock index dropped 3. 08 to 444.58. The price of an average share lost 20 cents.

Declines topped advances 1,074-750 among the 2,418 issues crossing the NYSE tape.

Adjusted volume amounted to 215,750,000 shares, compared with 252, 670,000 in the same period Thursday.

Prices ended slightly lower on the American Stock Exchange and in over-the-counter trading.

A.C. Moore, investment strategist at Argus Investment Management in Santa Barbara, Calif., said the market came under further profit taking because it "was still consolidating its recent sharp gains."

After last week's 132-point upsurge, he said, "the market has become extended and overbought and it's now working off its excesses."

Moore said the market also "ran into some strong technical resistance. The 448 area on the S&P and the 3400 area on the Dow make the market more overbought and subject to a pullback."

Dennis Jarrett, chief market strategist at Kidder Peabody & Co., agreed that the market experienced "normal profit taking. You've got to have a bit of consolidation after running up a 132-point gain" last week.

The market was also hit by computer-driven sell programs, Jarrett said, adding that probably "nobody wants to be brave ahead of a long weekend."

Analysts said stocks opened lower as the market encountered further profit taking as it continued consolidating last week's big gains. Players said many market watchers had begun to worry Wall Street's upward momentum would continue to erode.

Analysts regarded Friday morning's government economic report benign, saying inflation data appeared pretty much in line with expectations.

The Labor Department said wholesale inflation made its biggest climb in four months during January, driven up by a surge in gasoline prices.

Labor said its Producer Price Index rose 0.2 percent last month, slightly higher than the 0.1 percent increase economists had expected. The PPI edged up 0.1 percent in December.

On the NYSE trading floor, RJR Nabisco Holdings paced the Big Board actives, edging up 1/4 to 91/4.

General Motors followed, edging up 1/4 to 403/4 after a rating upgrade from UBS Securities.

Student Loan Marketing Association was third, dropping 47/8 to 581/4 after a rating downgrade from Smith Barney Harris Upham & Co. and being removed from Goldman Sach's recommended list. There is growing concern that the Clinton administration may reform the guaranteed student loan program by replacing it with a direct loan program financed by the government.

The stock of Student Loan Corp., another servicer of student loans, fell 31/2 to 185/8.

Among some of the blue chips, IBM fell 1/2 to 505/8, Philip Morris slid 5/8 to 727/8, Merck eased 1/4 to 401/2, and International Paper, which traded ex-dividend, edged up 1/8 to 683/8.

In over-the-counter trading, the National Association of Securities Dealers composite index slipped 5.34 to 690.54. Declines topped advances 1,088-866 among the 2,939 issues traded.