STOCKS : Dow Dips 11.41; Blue Chips Slip as Bonds Rally

Blue chip stocks fell Friday despite a strong bond market rally that pushed yields to their lowest level in two months.

The Dow Jones industrial average fell 11.41 points to 3,006.26. The broader market was slightly higher, with 900 issues rising and 662 falling. New York Stock Exchange volume was 162.27 million shares as of 5 p.m. EDT, against 170.61 million at the same point Thursday.

For the week, the Dow rose 33.76 points.

Bond prices rallied on signs of economic weakness, which created hopes that there will be a cut in interest rates to spur growth.

Although the unemployment rate slipped to 6.8% from 7% in June, the improvement was attributed to job seekers giving up the search. The government said non-farm payrolls declined last month by 51,000.

But bond investors’ hopes for lower rates failed to spur the stock market.

Among the market highlights:

* Singer topped the NYSE most-active list, closing at 14 1/4 on its first day of trading. The company went public again this week after being private for two years.

* USX-Marathon added 1 3/4 to 27 5/8 as investors responded to its optimism about the potential size of an oil discovery in Tunisia.

* Eli Lilly gained 2 3/4 to 79. On Thursday, the Food and Drug Administration ruled that Lilly’s Prozac, a widely prescribed anti-depression drug, hadn’t been shown to cause suicidal or violent behavior.

* Coca-Cola jumped 1 to 61 7/8 after the company held an upbeat meeting with Wall Street analysts.

* American Express, which rose 1 on Thursday after billionaire investor Warren E. Buffett disclosed that he was investing $300 million in the company, slid 5/8 to 25 3/4.

* Other blue chip losers included Exxon, down 5/8 at 58 3/4; IBM, down 3/4 at 100 3/8; McDonald’s, down 1/2 at 31 3/4; Merck, down 5/8 at 127 5/8, and General Electric, down 1/4 at 72 3/4.

* J. C. Penney dropped 1/8 to 49 on reports that its earnings for the quarter ended July 27 will be down as much as 75%.

* Precious-metals stocks gave ground as gold, platinum and silver prices fell. Homestake Mining lost 1/4 to 16 1/2, Newmont Gold fell 3/4 to 37 1/4, Battle Mountain Gold dipped 1/2 to 9 1/8, ASA lost 3/8 to 50 1/8, and Hecla Mining dropped 1/2 to 10 1/8.

Credit

Treasury bond prices soared to their highest levels in two months, sending interest rates lower, after the government reported employment figures for July that were weaker than expected.

The Treasury’s bellwether 30-year bond jumped 1 3/16 point, or $11.88 per $1,000 in face amount. Its yield, which moves in the opposite direction from price, sank to 8.24% from 8.35% Thursday.

The jobs figures were at odds with the assumption of many economists that the recession is ending. That raised hopes that the Federal Reserve will lower interest rates to boost the economy. Lower rates benefit fixed-return securities such as bonds.

The federal funds rate, the interest on overnight loans between banks, was 5 5/8%, down from 5 13/16% Thursday.

Currency

The dollar fell sharply in heavy trading after the release of a report that indicated that U.S. companies continued to lay off workers in July.

“The data was far weaker than expected in terms of payrolls,” said Robert Hatcher of Barclays Bank, noting that some economists had been looking for payrolls to increase by as much as 75,000 people.

“The market was badly, badly surprised, and the dollar just plummetted,” he said.

The dollar settled at 137.20 Japanese yen in New York, down from 137.55 Thursday. It closed at 1.7415 German marks, down from 1.7570. It cost $1.6890 to buy a British pound, more expensive than Thursday’s $1.6745.

Other dollar rates, compared to Thursday’s, included: 1.5147 Swiss francs, down from 1.5335; 5.9210 French francs, down from 5.9700; 1,301.50 Italian lire, down from 1,312.00, and 1.1505 Canadian dollars, up from 1.1498.

Commodities

With platinum taking the worst battering, precious-metals prices fell sharply.

On other commodity markets, soybean futures surged, grains were mostly higher, oil prices rose, and livestock and meat were mostly lower.

Platinum plunged in reaction to heavy Japanese selling, fears of Soviet selling and perceptions that industrial demand for the metal is fading. Platinum futures settled $9 to $9.20 lower on the New York Mercantile Exchange, with the contract for delivery in October at $355.10 an ounce, lowest since early 1986.

On New York’s Commodity Exchange, gold futures settled $7.60 to $9.80 lower, with October at $358.90 an ounce. Silver was 11.8 to 14.2 cents lower, with September at $3.935 an ounce.

Soybean futures rallied to a 13-month high on the Chicago Board of Trade as traders bet against weekend showers breaking the Midwest’s drought. They settled 9 1/2 to 23 cents higher, with August at $6.37 a bushel, the highest settlement of a near-term contract since July 3, 1990.

Grain futures finished mostly higher. Wheat futures were unchanged to 3 1/2 cents higher, with September at $2.98 a bushel; corn futures were 1/4 cent lower to 1 1/4 cents higher, with September at $2.62 1/4 a bushel, and oats were 1/2 cent lower to 1 1/2 cents higher, with September at $1.35 a bushel.

Light, sweet crude oil futures finished 2 cents lower to 10 cents higher on the New York Mercantile Exchange, with September at $21.32 a barrel.