Dow Closes Down 2.69 After Jolting Job News : Market Overview

* The economy suffered an unexpectedly steep loss of jobs in November, and that news sent Wall Street stocks reeling in early trading. But prices recovered after the Federal Reserve again eased interest rates--for the 14th time since mid-1990.

The Dow Jones industrial average closed down just 2.69 points at 2,886.40. For the week, the Dow lost 8.28 points.

* The dollar plunged on the economic news, while yields on Treasury bonds closed mixed.

Stocks

Blue chip stocks followed an unnerving seesaw pattern. The government’s report of 241,000 job losses in November sent the Dow down 20 points in early trading, on renewed fears of another recession.

Then, after the Fed stepped in to cut interest rates, investors responded with the same enthusiasm that has greeted virtually all of the central bank’s rate cuts over the past 18 months: Stocks rose sharply, with the Dow up much as 30 points before falling near the close.

Advancing issues topped losers by 10 to 9 on the New York Stock Exchange; Big Board volume rose to 199.16 million shares from Thursday’s 165.35 million.

Greeted by new signs of economic weakness, the Fed cut the federal funds rate--the rate banks charge each other for overnight loans--by a quarter-point, to 4.5%. That rate has tumbled from 8.25% in mid-1990 as the Fed has tried to spur new borrowing and spending.

Bearish investors have argued that the Fed’s actions aren’t helping the economy, and that the United States is falling back into recession--which could devastate corporate profits and stock prices.

Investors showed again Friday that they want to believe that the economy will turn around. Still, some analysts said the newest rate cut may not be enough.

“A quarter-point is helpful, but it doesn’t have a strong impact,” said A. C. Moore, analyst at Argus Investment Management in Santa Barbara. “I think there’s a tinge of panic here about the economy.”

Still, most indexes ended higher even while the Dow lost ground. The NASDAQ composite index of small stocks jumped 2.27 points to 536.30. “People are buying stocks that, regardless of what the economy does will show higher earnings,” argued analyst John McElroy of 1838 Investment Advisors.

Nonetheless, many experts fear that a continuing barrage of bad news on the economy is certain to sink the market by January, even if interest rates continue to fall.

Among the market highlights:

* Investors continued to snap up some of the year’s strongest stocks--mostly companies that have shown themselves to be recession proof. Among retailers, Home Depot rose 1 7/8 to a new 1991 high of 63 7/8. Also hitting a new high was Wal-Mart, up 1 to 51 7/8.

Among drug firms, Merck rose 1 5/8 to 151, Johnson & Johnson gained 2 5/8 to 102 5/8, and Pfizer added 1 3/4 to 69 1/2. Biotech giant Amgen leaped 2 3/8 to 62 1/4. It won new patents on its drug Epogen.

* Food stocks also advanced, with General Mills up 1 3/4 to 68 5/8, Wrigley up 1 3/8 to 65 3/8 and Anheuser Busch up 1 1/4 to 57 1/4.

* Utility stocks were among the strongest. They benefit from lower interest rates. American Electric Power added 3/4 to 32 3/4, Detroit Edison rose 5/8 to 34 5/8, and Pacific Gas & Electric gained 1/2 to 31 5/8.

* Industrial issues were generally weak on new recession worries. Copper producer Phelps Dodge slid 3 to 64 7/8, Caterpillar lost 1 3/8 to 39 3/4, and International Paper dropped 1 7/8 to 64.

* Beleaguered IBM fell 1 1/4 to 89, a new 10-year low. The company is undergoing a major restructuring, but Wall Street remains skeptical.

Among other tech stocks, computer networker Novell dropped 3 to 53 1/2. Dean Witter cut its rating on the stock, which has been among the year’s strongest. But software firm Lotus Development continued to trade higher after news of cost-cutting actions. It rose 2 1/8 to 22 7/8.

Among Southland tech issues, Calabasas telecommunications-equipment firm Tekelec tumbled 2 1/8 to 13 1/4 after forecasting a break-even fourth quarter.

Overseas, economic and political worries conspired to push London stocks lower. The Financial Times 100-share average finished down 18.3 points at 2,388.7 for a net loss over the past week of 31.5 points.

In Frankfurt, stocks closed another cautious and quiet session slightly higher, with the DAX blue chip average ending at 1,558.18, a rise of 4.76 points on the day.

Stocks ended mixed in Tokyo in very quiet trading. The 225-share Nikkei average slipped 14.11 points to 22,445.06.

Credit

News of the latest Fed interest rate cuts sent discount rates on three-month Treasury bills down to 4.24% from 4.34%. The T-bill rate now is the lowest in 19 years.

Yields on longer-term T-bonds also dropped, but not as much. The Treasury’s 30-year bond closed up 17/32 point, or $5.31 per $1,000. Its yield fell to 7.80% from 7.84% Thursday.

After the dismal November jobs report, the Fed injected $3 billion into the banking system in a way analysts said left no doubt it was trying to bring down the cost of money by making cash readily available to banks. The move sent the federal funds rate, the overnight bank lending rate, down to 4.50% from 4.688% Thursday.

Though long-term bond yields initially dropped steeply on the unemployment news and the Fed’s credit-easing, rates began to edge up from their lows later in the day.

Analysts said many bond investors are fearful that the Fed will throw so much money into the economy that it will spur inflation in coming years. Thus, many experts don’t see long-term interest rates dropping much in the next few months even if short-term rates plunge further.

Currency

The dollar plummeted to its lowest level against the German mark in nine months, closing in New York at 1.568 marks, down from 1.589 marks Thursday.

The dollar also finished lower against the Japanese yen at 127.95, versus 128.70 Thursday.

The latest round of interest rate cuts sank the dollar, because lower rates make dollar-denominated investments less appealing to foreign investors.

Somber assessments of the economy by Washington officials only added to the bearishness, traders said. Some fear the dollar will go sharply lower in the months ahead.

Commodities

Oil and natural gas futures slid on the New York Merc for the second straight day in reaction to unseasonably warm temperatures and reports of ample heating oil supplies.

Light, sweet crude oil for January delivery tumbled 35 cents to $20.04 a barrel, while January heating oil plunged 2.16 cents to 57.14 cents a gallon.

Meanwhile, December gold rose $2 to $369.40 an ounce, and December silver slipped 0.5 cent to $4.02 on New York’s Comex.