FINANCIAL MARKETS : Dow Gains 36.98; Bond Yields Fall

Stock and bond markets responded favorably Friday to a fresh batch of economic reports that seemed to confirm the economy’s overall sluggish pace.

Long-term bond yields dipped to seven-week lows, and the Dow Jones industrial average gained 36.98 points to 4,647.54, its best one-day rise since Aug. 14.

However, analysts noted that trading was slow in advance of the long holiday weekend, so price moves tended to be exaggerated.

Nonetheless, traders said the markets’ tone was upbeat on the heels of the latest economic data.

The government reported that the nation’s jobless rate dipped to 5.6% in August as the economy created 249,000 non-farm jobs, a bigger-than-expected total.

However, the government’s chief economic forecasting gauge and a closely watched manufacturing-sector index both slipped, indicating bumps in the road back to healthy growth.

Combined, the reports appeared to support many investors’ optimism that the economy’s expansion will remain in low gear, generating little inflation and offering the hope of lower interest rates ahead.

“The bottom line is that the economy is not speeding up” to levels that would reignite worries about inflation or higher rates, said Mark Taborsky, analyst at Abacus Financial Group in Chicago.

The 30-year Treasury bond yield surged after the employment report was released but fell back by midday as other economic reports belied the employment gain. The T-bond yield closed at 6.61%, down from 6.65% on Thursday and the lowest since July 14. The yield was at 6.70% a week ago.

Short-term yields also declined for the week, with the six-month T-bill yield ending at 5.52%, down from 5.71% as recently as Aug. 22.

In the stock market, NYSE winners topped losers by 13 to 8, but most broad indexes posted modest gains compared to the Dow.

The Nasdaq composite index lost 0.64 point to 1,019.47 as technology stocks dipped again.

But the Russell 2,000 index of small stocks rose 0.86 point to a record 306.17.

The only worrisome development: Rising prices for oil, cotton and coffee helped push the Commodity Research Bureau index of 21 key commodities up 1.20 points to 241.17, the highest since Oct. 9, 1990.

Among Friday’s highlights:

* Auto stocks jumped in advance of strong August sales reports, which were released after the market closed. GM gained 1 3/8 to 48 1/2, Chrysler added 7/8 to 54 5/8 and Ford rose 1/2 to 31 1/4.

Industrial stocks in general seemed revitalized by expectations for sustained economic growth, even if at a less-than-robust pace. Winners included DuPont, up 1 to 66 3/8; Caterpillar, up 1 1/4 to 68 3/8, and Ingersoll-Rand, up 1 5/8 to 39 1/2.

* Many financial stocks gained on hopes for lower interest rates. J.P. Morgan surged 2 to 74 7/8, First Interstate added 1 to 96 1/2 and Merrill Lynch was up 1/2 to 58 1/8.

* Energy stocks were up sharply as crude oil prices advanced. Mobil jumped 2 to 97 1/4, Atlantic Richfield gained 2 3/8 to 111 1/2 and Schlumberger surged 2 7/8 to 67 3/8.

* On the downside, tech issues were weak after two days of gains. Microsoft sank 2 3/4 to 89 3/4, Dell lost 1 3/4 to 75 1/4, Intel eased 1/2 to 60 7/8 and IBM slipped 5/8 to 102 3/4.