* Bond prices soared despite a Labor Department report showing unexpectedly strong employment growth in April. The Treasury's bellwether 30-year bond jumped 29/32 point, or $9.06 per $1,000 in face amount. Its yield, which falls when the price rises, fell to 7.89% from 7.96% late Thursday.
* The stock market inched up, supported by the rally in Treasury bonds. The Dow Jones average rose 6.04 points to 3,369.41, a gain of 33.32 points for the week.
Bond prices fell in early trading after the release of the report showing unemployment fell to 7.2% in April from 7.3% in March. The report also showed businesses added a surprisingly strong 126,000 jobs during the month.
The robust report dashed hopes of an immediate easing of interest rates by the Federal Reserve, said Kevin Flanagan, a money market economist with Dean Witter Reynolds Inc.
Economists generally had projected that the unemployment rate would remain unchanged and that 72,000 jobs would be added.
There had been some sentiment in the market that if unemployment had worsened in April, the Fed would have moved to stimulate the economy with another cut in interest rates, which boosts the value of bonds.
Flanagan said bonds fell early "on a knee-jerk reaction" to the data. But "after further review, the report didn't seem so strong," and prices reversed.
Besides the jobless rate, the Labor Department report contained other statistics--including a decline in the average work week--that suggested second-quarter gross domestic product might not be able to exceed the first quarter's growth rate of 2%.
"The report was constructive for inflation expectations and boosted bond prices later in the day," said Kathleen Stephanson, a money market economist with Donaldson, Lufkin & Jenrette Securities Corp.
Prices of shorter-term government issues were mostly higher.
The federal funds rate, the interest on overnight loans between banks, was quoted at 3.688%, down from 3.813% late Thursday.
The stock market didn't react enthusiastically to the favorable employment report because prices already are high, traders said. Also, with a healthy earnings season ending, there is little news expected that would carry prices higher.
"A lot of good news is in the market already," said Lon Gorman, a managing director at First Boston Corp. "At some point here the market is going to have take some of the air out of the tires. We're at the upper end of all-time highs with not a lot to keep them here."
In the broader market, advancing issues edged out declining ones on the New York Stock Exchange. Big Board volume came to 168.73 million shares, another light day after 168.98 million shares were traded Thursday.
Uncertainty about the state of the recovery and already-lofty stock prices--the Dow average remained near its all-time high-- appeared to dampen market enthusiasm.
"I don't think anything is clear yet," said Jeffrey Tabak, a principal in the investment firm Miller Tabak Hirsch & Co. "I don't think anyone wants to make any commitments here."
Among the market highlights:
* Global Marine, the most heavily traded NYSE issue, closed up 1/8 to 1 7/8. The natural gas pipeline company said it received $55 million in a litigation settlement with Transco Energy.
* Pinelands, a broadcasting concern, shot up 5 3/4 to 17 3/4 after agreeing to be bought by Chris-Craft Industries for about $310 million, or $18 a share. Pinelands owns WWOR-TV in Secaucus, N.J
* Storage Technology sank 7 3/4 to 39 1/4. The company, which makes data storage equipment, said it doesn't expect to meet a $50-million revenue goal for a main product line.
* Among other actively traded Big Board stocks, Masco rose 3/8 to 29 1/2 after reporting that quarterly earnings more than doubled. IBM fell 5/8 to 93 1/8, Boeing was unchanged at 44 1/8, American Electric Power lost 1/4 to 31 1/2, and Chase Manhattan rose 7/8 to 29 1/2.
* Liz Claiborne rose 2 1/8 to 37 7/8 after offering to buy some operating assets of retailer Russ Togs, which is in bankruptcy proceedings.
* On the NASDAQ market, which fell 1.40 to 585.76, Sun Microsystems rose 1/4 to 29 3/4. A Morgan Stanley analyst upgraded his rating of the computer company. Pharm Marketing fell 3/4 to 16 1/2 after a public offer of 1.025 million shares was made at 16 3/4 a share.
Overseas, share prices closed another record high on the London stock exchange. At the close, the Financial Times 100-share average was up 23.8 points, at a record high of 2,725.7.
Tokyo stocks closed slightly lower with the 225-share Nikkei average closing down 34.93 points to 18,375.95.
Frankfurt's 30-share DAX index slid 2.63 points to 1,748.18, but was still up 14.15 points from last Thursday, the final trading day of last week.
The dollar staged a healthy advance in active trading on world currency markets after the better-than-expected U.S. unemployment data for April.
When it became apparent to traders that the economy was more robust than many had believed, the dollar rose in a technical rally on the notion that the Federal Reserve will not have to lower interest rates any time soon to keep the recovery humming.
Lower interest rates make dollar-denominated securities less valuable for investors, thereby decreasing their need for the U.S. currency.
Overall, however, interest rate differentials remain negative for the dollar, with German rates at historically high levels.
In New York, the dollar closed at 133.45 Japanese yen up, from 32.85 yen on Thursday. The dollar was also quoted at 1.645 German marks, up from Thursday's 1.638 marks.
Grain and soybean futures prices fell on the Chicago Board of Trade as forecasts for rain in key crop-growing areas prompted profit taking.
On other commodity markets, livestock and meat futures extended their rally; precious metals advanced, and oil futures retreated.
In Chicago, wheat for May delivery tumbled 6.75 cents to $3.81 a bushel; May corn fell 2.50 cents to $2.553 a bushel; May oats dropped 325 cents to $1.43 a bushel, and May soybeans fell 3.75 cents to $5.895 a bushel.
Elsewhere, June gold rose 40 cents to $336.00 an ounce on New York's Commodity Exchange. May silver rose 4.3 cents to $4.077 an ounce.
Crude oil futures rose modestly on the New York Mercantile Exchange in light trading, with light, sweet crude for June delivery rising 15 cents to $20.86 a barrel.