STOCKS : Bond Losses Put Drag on Stocks; Dow Slips 2.23

Stock prices ended mixed Friday in the slowest session in more than six months, as blue chips came under pressure from a sharp rise in bond interest rates.

The Dow Jones industrial average fell 2.23 points to 2,932.47. The index of 30 blue chip companies was up 25.72 points for the week.

Big Board volume was 69.91 million shares at 4 p.m. EDT, down from 139.37 million at the same point Wednesday and the lightest total since a 57.20-million-share day Dec. 24.

Financial markets were closed Thursday for Independence Day, and many investors turned it into a long weekend.

In the broader market, 793 stocks rose and 544 fell on the New York Stock Exchange.

“It’s a totally inconclusive day,” said Edward Shopkorn of Mabon Securities. “The real test will come Monday.”

The inflation-sensitive 30-year Treasury bond lost nearly a point--boosting its yield--as traders focused on June employment data released by the Labor Department.

Even though the jobless rate hit 7%, its highest level since 1986, and the number of jobs fell by 50,000, traders saw elements of economic strength.

The average worker put in longer hours, and manufacturers reported more overtime worked.

Stocks lost ground at the opening bell because of the losses in the bond market and a sharp fall in the Tokyo stock market.

Computer-driven buying helped revive stocks, but the interest was not enough to sustain a rally.

Among market highlights:

General Motors was one of the active issues, gaining 1/8 to 42 1/2. A Bear Stearns analyst said he is bullish on auto companies, based on higher-than-expected sales for the last 10 days in June. Chrysler was off 1/8 to 14 3/8, and Ford slipped 1/4 to 35 5/8.

* California banks continued to rebound after having been sold in recent sessions because of disappointing earnings forecasts. Wells Fargo added 1 1/8 to 66 1/2, First Interstate 1/8 to 26 3/4 and BankAmerica 1 to 34 1/2.

* SmithKline Beecham added 3 1/8 to 64 3/8. Hoare Govett issued a buy rating on the stock.

* Tiffany slipped 5/8 to 50 5/8. Alex. Brown lowered its rating and earnings estimates for the luxury-goods retailer.

* Apple Computer rose 2 1/2 to 45 5/8. On Wednesday, Apple and IBM announced a wide-ranging joint venture. IBM closed up 1/2 at 98 5/8. Software maker Microsoft fell 2 1/4 to 61 3/4.

Stocks were mixed in foreign trading.

In Tokyo the Nikkei average closed below 23,000 points for the first time since Jan. 16. The 225-share Nikkei was down 237.27, or 1.03%, to 22,898.34.

London shares ended higher on the back of the Wall Street gains and interest rate cut expectations. The Financial Times 100-share average closed up 14.3 at 2,484.7.

In Frankfurt, Germany, the 30-share DAX index ended the week with another modest gain--up 2.80 to 1,618.91.

Credit

Bond prices declined in an abbreviated session despite the report that unemployment reached its highest level in five years.

The Treasury’s bellwether 30-year bond fell 13/16 point, or $8.12 per $1,000 in face amount, in light post-holiday trading. Its yield was 8.49%, up from 8.41% Wednesday. The bond market was closed Thursday for Independence Day.

Normally higher unemployment would be greeted favorably by bond traders, who thrive on bad news because it provides impetus for the Federal Reserve Board to lower interest rates as a way to stimulate the economy.

But traders focused instead on other statistics in the report: the length of the average workweek was extended for the second-consecutive month, average hourly earnings increased and initial claims for unemployment insurance continued to decline.

A longer workweek is a sign that business is picking up. Higher wages raise concerns about inflation, said Douglas Schindewolf, a vice president at Smith Barney, Harris Upham & Co.

Trading was extremely light, he said, noting that the thinness of the market probably exaggerated the downward move in prices.

Trading ceased an hour earlier than usual.

The federal funds rate, the interest on overnight loans between banks, rose to 5.675% from 5.25% Wednesday.

Currency

The dollar fell against most major currencies in extremely thin trading, responding to technical factors and the worse-than-expected jobs report.

In addition, investors refrained from buying dollars because of concern that the world’s major central banks might intervene to stabilize currency rates.

The greenback skidded to 1.8265 marks in New York from Wednesday’s 1.8286. It was at 138.30 yen, up from Wednesday’s 139.58. The British pound was $1.6173, higher than Wednesday’s $1.6070.

Commodities

Prices of corn and soybean futures ended sharply lower on the Chicago Board of Trade after forecasts called for mostly wet weather in key growing regions. Wheat futures prices also plummeted.

On other commodity markets, energy futures gained, and meat and livestock futures were mixed. Precious metals futures were not traded on New York’s Commodity Exchange in an extension of the Fourth of July holiday.

Wheat futures settled 1.50 to 3.50 cents lower, with July delivery at $2.6125 a bushel; corn was 2.50 to 5 cent lower, with the July contract at $2.31 a bushel; oats were 0.50 lower to 0.75 cent higher, with July at $1.1175 a bushel, and soybeans were 3.25 to 7.75 cents lower, with July at $5.30 a bushel.

Trading remained relatively light as many investors took an extended holiday weekend.

Light, sweet crude settled 6 to 20 cents lower on the New York Mercantile Exchange, with August delivery at $20.89 a barrel.