Sharp Fall in Jobless Rate Boosts Stocks : Blue-Chip Issues Post Best Gain in 3 Weeks; Dow Index Rises 9.86

NEW YORK —  A sharp decline in the U.S. jobless rate helped blue-chip stocks to their best gain in nearly three weeks Friday, but the broader market scored only a moderate advance.

Still, it was the market’s first decisive gain this week.

However, bond prices plunged as much as $20 for each $1,000 in face value as traders responded to the decline in joblessness and other signs pointing to new economic strength, something that could push interest rates higher.

The Dow Jones average of 30 industrials jumped 9.86 to 1,335.69, its best performance since rising 11.20 points Aug. 20. For the holiday-shortened week, the average edged up 1.68 points.

Gainers outpaced losers by four to three among all New York Stock Exchange-listed issues, and the NYSE composite index rose 0.50 to 109.05.

Several other indexes also moved ahead, but there were indications of continued weakness in the market, according to some analysts.

Trading Remains Sluggish

For example, the Dow Jones utility average slipped 0.21 to 159.15, and the American Stock Exchange’s market-value index inched down 0.01 to 232.44.

Analysts also noted that, while trading picked up from earlier this week, it remained relatively sluggish. Big Board volume totaled 95.04 million shares, against 94.48 million Thursday.

“It was a traders’ rally, and one without conviction and without durability,” asserted Michael Metz, technical analyst at Oppenheimer & Co.

The Labor Department said the civilian unemployment rate, stagnant for six months, declined to 7% last month from 7.3% in July to reach its lowest level in more than five years. The decline was a surprise; many economists had looked for little change in the rate for August.

But Metz said the failure of the broader market to match the intensity of the blue-chip rally showed that investors want further evidence that the economy is gaining strength before they aggressively buy stocks in general.

“It’s premature to diagnose the economy as enormously vigorous because of this one figure,” he said. “But the market was starved for good news and was ready to react to it.”

On the NYSE’s active list, Richardson-Vicks surged 3 1/2 to 40 amid rumors that it is a takeover target. The company declined to comment on the speculation.

Elsewhere on the list, Beatrice rose 5/8 to 33 7/8, Revlon fell 7/8 to 43, Unocal dropped 3/4 to 29 7/8 and ITT climbed 1 to 34.

Among the blue chips, International Business Machines gained 3/4 to 129 1/8, Union Carbide rose 1 3/8 to 55 and General Motors jumped 1 7/8 to 69.

Airline stocks rebounded from their recent slump. UAL rose 1 to 53, AMR moved up 1 to 44 and Delta gained 3/8 to 44 3/8.

Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 116.49 million shares.

Large blocks of 10,000 or more shares traded on the NYSE totaled 1,931, compared to 1,843 on Thursday.

In the credit markets, yields on 30-year Treasury bonds soared to 10.71% from 10.47% late Thursday. Yields on short-term Treasury bills climbed more than a tenth of a percentage point.

In the secondary market, prices of short-term Treasury bonds fell 3/8 point to 1/2 point, intermediate maturities fell 3/4 point to 1 3/8 points and long-term issues were down 2 points to 2 1/8 points.

The Merrill Lynch daily Treasury index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, fell 0.96 to 105.20. The Shearson Lehman daily Treasury bond index, which makes a similar measurement, fell 9.81 to 1,104.34.

In corporate trading, industrials fell 2 points and utilities fell 1 points in light trading.

Among tax-exempt municipal bonds, general obligations and revenue bonds were down 1 point in active trading.

Yields on three-month Treasury bills shot up 14 basis points to 7.25%.