U.S. stocks were mixed Friday as gains in computer and software issues offset concern that the Federal Reserve Board may forgo lowering interest rates later this month.
A government report that unemployment edged higher last month was considered a sign of a weakening economy, but was not powerful enough to assure the interest rate cut that financial markets have been expecting.
The Dow Jones industrial average declined 2.53 points to 5,156.86, ending in the minus column for the second day in a row after three record-breaking sessions. The Dow index rose 69.73 points for the week after setting a new high Wednesday of 5,199.13.
Broad-market indexes ended mostly higher. The Standard & Poor's 500-stock index rose 1.31 points to 617.48 and the Nasdaq composite index rose 6.85 points to 1,060.02.
Nervous investors sold a wide swath of blue-chip issues to lock in profits. "Most portfolios have done extremely well" this year, said Michael Metz, Oppenheimer & Co.'s market strategist. "They're not inclined to increase exposure at the end of the year."
The 30 Dow index components were led lower by Philip Morris, which fell 1 3/8 to 89 1/4. The Wall Street Journal on Friday described the contents of an internal company draft report that said nicotine is chemically similar to addictive drugs such as cocaine. Tobacco executives have denied in sworn Congressional testimony that cigarettes are addictive.
Another reason for the selling, Metz said, is that investors have become nervous that the budget impasse in Washington will drag on. Republicans took the weekend to review President Clinton's new budget proposal.
Fed Vice Chairman Alan Blinder was quoted in a news report as saying that financial markets were overly optimistic about a rate cut on Dec. 19, the Fed's final meeting this year to set monetary policy. Both the stock and bond markets have risen sharply in recent weeks in anticipation that as soon as a budget agreement is reached, the Fed would lower interest rates.
Metz also said that there is "a feeling that maybe the market's already discounted an interest rate cut that will not happen. The news from Washington is not exactly encouraging."
But that did not appear to disturb the bond market, where the 30-year Treasury bond yield fell to 6.05% from 6.08% late Thursday.
Stocks and bonds started the day higher after the Labor Department reported surprisingly sluggish November jobs data. Labor said the nation's unemployment rate edged up to 5.6% in November. Businesses added 166,000 jobs, but Labor said many of those jobs were due to special factors that did not reflect underlying strength.
The Commerce Department also said sales of new homes fell 2.7% in October. But that news, which bolstered hopes for an interest-rate easing, was eclipsed by a report that the University of Michigan consumer sentiment rose during early December compared with November.
Meanwhile, Mexico's central bank said it bought pesos to shore up its currency, which was battered in early trading by investors demanding U.S. dollars to cover year-end transactions.
The purchase is the third time in a month that Banco de Mexico sought to ease pressure on the currency. On Nov. 14, the central bank bought $125 million to bolster the currency, and on Nov. 9 it acquired $175 million. Central bank officials declined to disclose the amount of pesos purchased today.
The currency was trading at its lowest level in 3 1/2 weeks when the central bank decided to buy pesos. It closed at 7.71 pesos to the dollar.
Among market highlights:
* Computer stock broke the overall trend, recovering Friday. On Thursday, Microsoft announced a sweeping new plan to take advantage of the Internet that included using technology developed by Sun Microsystems and Oracle. In Friday Nasdaq trading, Microsoft's shares rose 4 to 94 1/2, Sun Microsystems added 6 5/8 to 99 3/4, and Oracle gained 2 3/8 to 46 5/8. Intel rose 1 5/8 to 63 1/4. On the Big Board, IBM rose 2 1/8 to 96 7/8, and Micron Technologies added 2 7/8 to 54 3/4.
* Shares of Internet-related companies, which have been challenged by Microsoft, ended mixed. Netscape fell 4 to 128 1/2, and America Online lost 1/4 to 41 1/8. But Spyglass climbed 2 3/4 to 98.
Hewlett-Packard gained 4 7/8 to 87. Donaldson Lufkin & Jenrette added the stock to its buy list.
In overseas trading, the Nikkei index in Tokyo slipped 0.65%, and London's FTSE-100 gave up 0.26%. But the DAX index in Frankfurt gained 0.19%.
Forecasts of unusually cold weather in the Midwest and Northeast drove heating oil prices Friday to their highest levels since October 1993. Soybean meal and corn prices on the Chicago Board of Trade also advanced with the prospect of cold weather leading to more feed usage by the nation's livestock.
"This winter could rival those of the late 1970s and early 1980s," said Weather Trades President Jim Roemer.