FINANCIAL MARKETS : Oil Issues Fuel Stocks During Muddled Day : Markets: Dow climbs 21.87 despite a favorable report on jobs. Gasoline prices jump, but the price of crude is mired.

Stocks closed higher Friday with the help of surging oil issues, which rallied on reports that Iraq was again massing troops near its border with Kuwait. The dollar rose and government bonds yields fell.

The Dow Jones average of 30 industrials broke a three-day losing streak and rose 21.87 points to 3,797.43, though it still ended the week with a 45.76-point loss. Gainers overall led losers 4 to 3 on the New York Stock Exchange, where volume was a moderate 284.2 million shares.

The Standard & Poor’s 500-stock index rose 2.74 points to 455.10, and the Nasdaq composite index added 5.77 points to 749.96.

Gasoline prices also jumped amid fears that another conflict between the oil-rich Persian Gulf nations would tighten the world’s fuel supplies. But curiously, the price of crude oil itself, which initially soared on the reports, pulled back in later trading and finished nearly unchanged.

The stock market’s gain added to the day’s muddled course because it followed a relatively strong September employment report from the Labor Department, analysts said. Investors had aggressively sold stocks earlier in the week on grounds that the economy’s brisk expansion might prompt the Federal Reserve Board to raise interest rates in order to curb higher inflation.

In addition, transportation stocks--which are often vulnerable to any hint of higher fuel prices--posted widespread gains, and the Dow Jones transportation average gained 6.28 points to 1,444.78.

“It’s been a very odd day,” said David Shulman, chief equity strategist at Salomon Bros. “If you’re worried about some problem in the Middle East, you would expect stocks to sell off.”

But the Persian Gulf concerns bolstered the U.S. dollar against most major currencies as foreign exchange traders sought the greenback’s safety, and the dollar’s strength in turn bolstered stock and bond prices, Shulman said.

The dollar climbed to 100.67 Japanese yen in late New York trading, up from 99.86 yen on Thursday and its first close above 100 yen since Aug. 31.

The yield of the Treasury’s bellwether 30-year bond, meanwhile, fell to 7.90% from 7.96% on Thursday.

Stocks moved higher after the opening bell, following the Labor Department’s report that the U.S. jobless rate fell to 5.9% last month from 6.1% in August.

The report, while signaling continued economic strength, did not convince the markets that the Fed would immediately hike lending rates--as it already has five times this year--to fight inflation. The report also says that average hourly earnings, a widely watched gauge of inflation, rose a moderate 3 cents to $11.16.

“As the market commonly does, it overreacted” earlier this week when prices slumped in anticipation that a rate hike was imminent, said Rich Weiss, chief investment officer for Sanwa Bank’s trust division in Los Angeles.

“When the (employment) news actually came out, the removal of the uncertainty was viewed as a positive,” he said.

But then the market was buffeted by the Middle East developments. Iraq indirectly confirmed there had been military movements but denied that it planned to re-invade Kuwait.

Nonetheless, the U.S. State Department accused Iraq of threatening Kuwait with a buildup, and President Clinton dispatched an aircraft carrier to the region.

The combination of developments sent fuel prices higher. The price of high-grade light, sweet crude for November delivery at one point jumped 45 cents a barrel, but it ended the day with only a penny gain, at $18.26 on the New York Mercantile Exchange.

Gasoline and heating oil prices kept their gains, however. Unleaded gasoline for November delivery surged 0.56 cent to 47.52 cents a gallon, and November heating oil rose 0.19 cent to 50.43 cents.

Oil stocks followed suit. Atlantic Richfield jumped 2 5/8 to 100 1/4, Texaco rose 1 1/8 to 61 1/8 and Exxon added 1 1/2 to 58 5/8.

Among market highlights:

* Defense stocks rose broadly after the Iraqi news. McDonnell Douglas rose 1 5/8 to 118 7/8, Lockheed gained 1 3/8 to 69 1/4 and Northrop Grumman rose 5/8 to 46 1/8.

* Among the Dow Jones industrials, IBM rose 2 3/8 to 71 1/8 and AT&T; gained 3/8 to 52, but General Electric fell 1/4 to 46 3/4.

* In foreign trading, London’s FTSE 100 index rose 14.3 points to 2,998.7, while the DAX index in Frankfurt slipped 0.44 point to 1,960.59. Tokyo’s Nikkei average climbed 89.52 points to 19,744.75. In Mexico City, the Bolsa index rose 12.88 points to 2,649.79.

Iraq Scare Boosts Oil Markets

Oil prices surged to eight-week highs on Friday on news of Iraqi troop movements near Kuwait, but by the close of trading crude futures were up just 1 cent from Thursday. Major oil stocks, however, kept most of their gains for the day.

Stock 1994 high-low Friday close and change Amoco $61.25-50.83 $58.83, +$0.88 Arco 112.38-92.50 100.25, + 2.63 Chevron 47.25-39.83 42.25, + 1.00 Exxon 67.38-56.13 58.63, + 1.50 Mobil 86.13-72.00 79.38, + 1.38 Phillips 35.13-25.50 34.50, + 1.00 Texaco 68.13-58.13 61.13, + 1.13 Unocal 30.75-24.38 28.00, + 0.75

Weekly closes per barrel:

October 1994 (Friday): $18.26

Interest Rates:

30-year T-Bond: 7.90%

1-year T-Bill: 5.99%