FINANCIAL MARKETS : Markets Close on Mixed Note; Dow Gains 5.38

U.S. stocks closed mixed on Friday after Thursday’s big selloff, as the Treasury bond market stabilized and municipal bond prices continued to recover from Orange County fallout.

But analysts warned that a slew of economic statistics due next week could rile markets anew.

Meanwhile, some foreign markets slumped badly in the wake of Wall Street’s dive Thursday.

The Dow industrials inched up 5.38 points to 3,691.11 on Friday after tumbling 50 points on Thursday. For the week the Dow lost 54.51 points, and it now is 6.6% below its autumn high.

In the broad market Friday losers still outnumbered winners by 13 to 9 on the NYSE and by 16 to 13 on Nasdaq, and the Russell 2,000 index of smaller stocks fell 0.93 point to 235.16--its lowest level since July, 1993.

Wall Street was still trying to gauge the potential far-reaching effects of Orange County’s bankruptcy filing, which along with continued fears of higher short-term interest rates helped spark stocks’ latest decline.

The Orange County investment fund debacle “makes you aware that there are people out there who don’t know what they are doing (in markets), and by extension, you become less trustful of the market itself,” said Trude Latimer, chief strategist at Ferguson, Andrews & Associates Inc.

Many analysts also believe that the county’s troubles simply gave weary stock investors an excuse to sell this week, after months of rising interest rates.

Thursday’s selloff looked like it would continue Friday, as the Dow fell 28 points early in the day. But computerized buy programs pulled the market up in the afternoon. Trading remained heavy at 336 million shares on the NYSE.

A stable Treasury bond market helped stocks. Yields closed mostly unchanged; the 30-year T-bond yield slipped to 7.85% from 7.87% on Thursday.

Municipal bonds, which sank in value on Wednesday amid worries that Orange County’s disaster could repeat elsewhere in the country, continued to edge higher on Friday. The share value of the Putnam California Tax-Exempt Income “A” bond fund, one of the largest California muni funds, inched up 1 cent on Friday to $7.72. It had fallen 13 cents Wednesday and 1 cent Thursday.

But analysts warned that the bond market was likely to be tested again next week, when the government reports key economic data for November, including inflation, retail sales and housing starts. Signs of strength could put further upward pressure on interest rates.

Also, any significant new financial crises among municipalities nationwide could cause more muni bond investors to bail, analysts note.

In the stock market, bearishness among professional investment advisers has reached levels not seen since March, 1982. While extreme bearishness can presage a rally, Wall Streeters also note that the bears sometimes are right--meaning that the market can go lower.

Among Friday’s highlights:

* Technology stocks led the rebound, after a bullish report on November semiconductor orders. Motorola gained 1 1/2 to 55 1/4, Texas Instruments rose 1 3/8 to 72, Hewlett-Packard jumped 2 1/2 to 95 1/8, IBM rose 1 3/8 to 71 1/2 and Computer Associates was up 1 to 44 5/8.

* Drug stocks also rose. Pfizer added 1 to 75 1/4, Warner-Lambert gained 1 1/4 to 75 1/4, Merck added 1/2 to 37 1/4 and Amgen rose 5/8 to 54 1/2.

* Airlines, which had led the week’s market decline on earnings concerns, were mixed. AMR, parent of American Airlines, added 1 1/8 to 49 7/8 and Delta gained 3/4 to 47, but Continental Airlines’ B shares eased 1/4 to 8 5/8.

Meanwhile, railroad stocks came under pressure after brokerage Morgan Stanley downgraded six of them to hold from buy.

Wall Street’s bearishness spilled into some foreign markets. Hong Kong’s Hang Seng index plummeted 279.24 points, or 3.5%, to 7,789.07, a new 1994 low. Singapore’s Straits Times index dove 37.40 points to 2,102.28 and Mexico City’s Bolsa index fell 32.11 points to 2,467.79.

In London the FTSE-100 index slumped 36.5 points to 2,977.3 while Frankfurt’s DAX index was off 13.88 points to 2,028.33. In Tokyo the Nikkei-225 dropped 201.74 points to 18,978.30.