STOCKS : Labor Report Fails to Inspire; Dow Up 3.13

The release of eagerly awaited August employment figures failed to rouse Wall Street stocks Friday, with the market ending only slightly higher despite a sharp drop in bond yields.

The Dow Jones industrial average gained just 3.13 points to 3,011.63. It was the first gain in five sessions but left the 30-share average nursing a loss of 31.97 points for the week.

Declining issues slightly outnumbered advances on the New York Stock Exchange with 799 issues falling and 762 rising. Big Board volume came to an estimated 167.45 million shares, against Thursday’s 162.38 million.

The Labor Department reported early Friday that the jobless rate held steady at 6.8% of the work force in August. But the closely watched figure of non-farm jobs posted a gain of 34,000. That was higher than the 22,000 average estimate from economists and was only the second rise in 14 months.

Economists were split over whether the figures would prompt the Federal Reserve to push down interest rates in order to get the economy moving faster. Many said that the Fed would likely act, but not right away.

“I think the stock market is waiting for another (credit) ease, which will provide another insurance policy for the economy in general and earnings in particular,” said Tom Carpenter, economist at ASB Capital Management.

Among the market highlights:

* Pepsico continued to slip amid worries about price competition in its snack food and beverage businesses. The stock fell 3/4 to 29 1/8, while archrival Coca-Cola rose 7/8 to 65 1/8. Other food stocks, big losers on Thursday, stabilized. Borden inched up 1/8 to 33 3/4, Kellogg added 1/2 to 104 3/4, and Heinz eased 1/2 to 40 1/2.

* Pfizer gained 3 to 68 1/4. It received a letter from the Food and Drug Administration saying its new antibiotic, Zithromax, is an approvable drug.

* Elsewhere in the health-care group, HMO stocks came under renewed pressure. PacifiCare dropped 3 1/8 to 27 7/8, and FHP lost 1 1/2 to 16 1/2.

* Some entertainment stocks tried to pull the market higher. Marvel Entertainment rose 1 3/8 to 27 1/4, Circus Circus gained 2 to 38, and Showboat added 1/2 to 11 3/8.

* Major airlines were mostly lower, apparently weighed down by worries about earnings prospects in a persistently sluggish business climate. UAL fell 3 7/8 to 127 1/2, Delta lost 7/8 to 64, and AMR gave up 7/8 to 56 1/2.

* Trimedyne soared 2 at 5 3/8, the largest percentage gainer among all over-the-counter issues, up 59%. The Irvine-based firm received federal approval to market its laser catheter that removes fatty deposits from blood vessels.

Overseas, stocks closed higher on the Tokyo Stock Exchange in heavy trading, with the 225-share Nikkei average finishing 192.95 points higher at 22,692.60.

London secured modest gains in active trading. The Financial Times 100-share index closed 4.1 points higher at 2,667.4.

German shares ended barely changed with Frankfurt’s DAX average index ending at 1,646.18, off 0.99 points.

Credit

Treasury bond prices soared, driving yields down, as traders bet that the August employment report increased the chances the Federal Reserve will move to ease interest rates further.

The price of the Treasury’s bellwether 30-year bond climbed 7/8 point, or $8.75 per $1,000 in face amount. Its yield, which moves in the opposite direction from price, tumbled to 8.01% from 8.09% late Thursday.

Disappointing news about the economy often boosts bond prices because it makes it more likely the Fed will ease interest rates. Lower rates benefit fixed-return securities such as bonds.

The bond rally was across the board, as investors poured into shorter-term bonds as well, fearing that this may be the last chance to lock in decent yields.

However, Steven R. Ricchiuto, an economist at Barclays de Zoete Wedd Securities, said he did not believe the Fed would ease rates until after the release next Thursday of wholesale price figures for August, which are an indicator of inflationary trends. The central bank is wary about easing rates if it appears inflation is rising.

The federal funds rate, the interest on overnight loans between banks, was quoted at 5.438%, down from 5.625% late Thursday.

Currency

The dollar fell in heavy trading. Currency dealers attributed the busy session to technical selling after the release of the August jobless report.

Many currency traders had refrained from active dealing since late last week in anticipation of the employment report.

Traders said the report itself did not prompt the dollar’s decline, but rather that technical selling swept the market around noon.

The heaviest selling was against the German mark, with the dollar quoted in New York at 1.717 marks at closing, down from 1.738 late Thursday. Against the Japanese yen, the dollar was quoted at 135.65, down from 135.80.

Commodities

For the third day in a row, the cattle futures market ignored the ample supply of animals ready for slaughter and posted sizable price gains at the Chicago Mercantile Exchange.

Analysts said the cattle market appears to be looking ahead to leaner supplies toward the end of the year, while benefiting from a self-perpetuating rally.

Cattle for delivery in October advanced 0.62 cent to 72.12 cents a pound; September feeder cattle was 0.40 cent higher at 85.52 cents a pound; October hogs were 0.50 cent higher at 45.30 cents a pound, and February pork bellies were 1.38 cents higher at 49.10 cents a pound.

Light sweet crude oil for delivery in October declined 12 cents to $21.57 a barrel on the New York Mercantile Exchange.

Precious metals futures were higher at the Commodity Exchange in New York. September gold was $2.10 higher at $349.10 an ounce, and September silver was 10.5 cents higher at $3.969 an ounce.

Market Roundup, D6