STOCKS : Jobless Data Chills Market; Dow Up 0.25

Stocks closed marginally higher in subdued trading Friday, as a surprise drop in the nation’s jobless ranks threw cold water on hopes of another cut soon in U.S. interest rates.

The Dow Jones industrial average edged up 0.25 to 2,938.86, closing out the week with a net gain of 26.48.

Advancing issues on the New York Stock Exchange totaled 748, while 749 declined. And in another measure of investors’ uncertainty, Big Board volume fell to 158.16 million shares from Thursday’s 187.09 million.

News that non-farm payrolls fell by a smaller-than-forecast 124,000 jobs in April offered hope that the recession is bottoming. But it also suggested that this week’s interest rate cuts by the Federal Reserve may be the last for a while, analysts said.

A. C. Moore, strategist at Argus Investment Management, noted that “stocks are ultimately a reflection of interest rates and earnings. But they tend to respond more dramatically to interest rates than earnings.”

For most of Friday, Wall Street sifted through the April employment report, trying to ascertain how much strength it suggested about the economy. But in the end, investors appeared paralyzed by the report. The Dow index’s marginal gain was mirrored in other indexes: The NASDAQ composite index of mostly smaller stocks inched up just 0.97 to 492.10.

Indeed, for two weeks now, the only part of the market that has lured an increasing number of investors is the new-issues area. And many analysts say the frothy demand for new stocks is a bad sign for the market, suggesting that a near-term peak is approaching.

“As they use up cash (on new stocks), there’s going to be less support in the market,” warned one trader.

Among the market highlights:

* In the Dow, a sharp decline in IBM--off 2 1/4 to 103 5/8, as more analysts cut earnings estimates--was offset by gains in some consumer goods stocks, considered a haven. Merck rose 2 1/2 to 115 3/8, Coca-Cola gained 3/4 to 55 1/8 and Philip Morris rose 5/8 to 69 1/8.

* Other consumer gainers included Kellogg, up 5 1/2 to 96, Gerber, up 1 3/8 to 61 1/4, General Mills, up 1 3/8 to 58 1/8, and Pfizer, up 3/4 to 57 3/4.

* The jobs report gave some investors cause to buy selected industrial names, despite the still-murky outlook. GM rose 7/8 to 38, Deere gained 1 1/2 to 52 1/2 and steel firm Quanex added 5/8 to 15 3/8.

* Tech stocks were mixed, as software mostly gained and hardware eased further. Computer Sciences jumped 1 7/8 to 69 1/8 and Lotus rose 1 1/8 to 34 3/8, but Hewlett-Packard fell 1 5/8 to 46 1/4 and Digital Equipment dropped 1 1/4 to 66 1/8.

* The three stocks that will be added to the Dow index Monday rose. Disney rose 2 3/4 to 120 5/8, Caterpillar added 7/8 to 50 1/4 and J. P. Morgan gained 1 1/4 to 53 7/8.

* Among new stock issues, demand remained strong. Duracell gained 1/2 to 21 1/4. It went public Thursday at 15. Storage Technology, which sold 3.45 million new shares at 41, jumped 3 1/2 to 45 1/4. Banking firm NCNB slipped just 1/4 to 37 after setting the sale of 10 million new shares.

* Blockbuster Entertainment fell 1 to 10 3/8 after a franchisee, Cox Cable, said it is selling 82 Blockbuster Video stores.

In foreign trading, British stocks finished lower, as the Financial Times 100-share average lost 8 points to 2,522.7.

Germany’s DAX average closed 1.80 points higher at 1,631.84.

Mexican stocks rose, for the 10th straight week of gains. The Bolsa index rose 1,827 to 926,566.

The Tokyo stock market, closed Friday for national holidays, will not reopen until Tuesday.

Credit

The bond market, shocked by the surprisingly strong employment report, fell.

The Treasury’s bellwether 30-year bond fell one point, or $10 per $1,000 in face amount. Its yield jumped to 8.22% from 8.12% on Thursday.

“All week the market was really getting ahead of itself,” said James Hale, economist at MMS International. Earlier in the week, the bond market rose daily, helped by expections of a weak jobs report.

Without hope for lower market interest rates to make older bonds more attractive, many traders bailed out. There also is considerable anxiety about the Treasury’s record auction of notes and bonds set for next week.

The federal funds rate, the interest on overnight loans between banks, fell to 5.50% from 5.688% on Thursday.

Currency

The dollar jumped against leading currencies after the unexpected drop in the nation’s unemployment rate in April fueled hopes that the economy may soon rebound.

In New York, the dollar closed at 1.748 German marks, up from 1.720 Thursday. It also finished at 138.85 Japanese yen, up from 138.15.

“The employment figures, particularly the unemployment rate, caught the market completely off guard,” said Sebastian Sainsbury of AIG Trading.

Commodities

Prices of copper futures settled at their lowest level in three months after briefly touching a 14-month low amid signs that stockpiles are expanding.

Copper futures settled 1.30 to 3.40 cents lower on New York’s Comex, with the contract for delivery in May down 3.10 cents at $1.03 a pound.

Elsewhere, gold finished $1.10 to $1.30 lower, with May at $353.90 an ounce. Silver was 5.4 to 5.6 cents lower, with May at $3.94 an ounce.

Light, sweet crude oil settled 23 cents higher, with June at $21.37 a barrel.

Market Roundup, D6