STOCKS : Market in Doldrums; Dow Takes a 7.42 Hit

Stock prices churned in place Friday today, bogged down in uncertainty about the economy and the situation in the Persian Gulf.

The Dow Jones average of 30 industrials dropped 7.42 to 2,566.09, extending its decline for the week to 63.12 points.

In the broader market, advancing issues outnumbered declines by about 8 to 7 in nationwide trading of New York Stock Exchange-listed stocks, with 790 up, 698 down and 496 unchanged.

Big Board volume totaled 140.82 million shares, down slightly from Thursuday’s 141.45 million.

Traders seemed unsure how to respond to the news that Secretary of State James A. Baker III would meet Wednesday with Iraqi officials in Geneva.

In addition, analysts said new government statistics on the economy left investors with some doubts about prospects for Federal Reserve policy and a continued decline in interest rates.

The Labor Department reported that the unemployment rate increased to 6.1% in December from 5.9% the month before. But the figures also showed a smaller-than-expected decline of 76,000 in non-farm payroll employment.

Interest rates rose in the U.S. Treasury bond market after those numbers were made public.

Separately, the Commerce Department said new factory orders fell a record 5.9% in November. To complicate the session further, telephone service disruptions in the New York City area caused problems for some investment firms and an estimated 25 dealers in the over-the-counter market. The NYSE said its operations were not disrupted.

Among the market highlights:

* Merck, down 1 3/8 at 85 1/4; Bristol-Myers Squibb, down 3/4 at 63 5/8; General Electric, down 5/8 at 54 5/8; Westinghouse Electric, down 1 1/2 at 25 7/8, and General Motors, down 1 at 33.

* General Motors fell 1 to 33, its lowest level since early 1988.

* Aluminum Co. of America fell 1 1/4 to 56 3/8. The company said it would take a $275-million charge against its fourth-quarter results, about half of it reflecting a writedown of the value of certain business assets.

* Woolworth dropped 1 1/8 to 27 7/8 in selling attributed to lowered earnings expectations for the fiscal quarter that ends this month.

In London, share prices ended the day steady but below the day’s highs, still haunted by low turnover and worries about the gulf crisis and the British economy. The Financial Times-Stock Exchange 100-share index closed up 8.3 points at 2,126.1.

In Frankfurt, the 30-share DAX index ended with a rise of 29.42 points to close at 1,396.07.

In Tokyo, new year’s buying by big brokerages and by arbitragers pushed up prices in sluggish trading. The Nikkei 225-share index rose 220.47 points to close at 24,069.18.

CREDIT Bond Prices Fall, Yield Jumps to 8.20% The worst unemployment rate in more than three years wasn’t bad enough for the bond market, where prices skidded on perceptions that the economy isn’t as anemic as traders had been led to believe.

The Treasury’s bellwether 30-year bond dropped 1 5/32 points, or $11.56 per $1,000 in face amount, at Friday’s close. Its yield, which rises when prices fall, jumped to 8.20%, up from 8.10% late Thursday.

Based on previous trends, bond traders expected December’s unemployment rate would be higher than the 6.1% figure the Labor Department reported. The November rate was 5.9%.

The federal funds rate traded at 5% on Friday, far below its Thursday close at 7%.

CURRENCY Jobless Report Helps Dollar Stage Climb The dollar advanced sharply on world currency markets in buying triggered by the better-than-expected report on U.S. unemployment for December.

In Tokyo, the dollar fell 2.08 yen to a closing 133.32 yen. Later in London, it was quoted at a higher rate of 135.10 yen. In New York, the dollar settled at 134.85 yen, up from 133.00 yen on Thursday.

In London, the British pound fell to $1.9340 from $1.9465 late Thursday. In New York it cost $1.9350 to buy one pound, less expensive than Thursday’s $1.9475.

Other late dollar rates in New York, compared to late Thursday’s rates included: 1.5050 German marks, up from 1.4925; 1.2740 Swiss francs, up from 1.2645; 5.1070 French francs, up from 5.0720; 1,132.00 Italian lire, up from 1,123.00, and 1.1513 Canadian dollars, down from 1.1529.

COMMODITIES Peace Talks Plan Drives Down Oil A scheduled meeting between U.S. and Iraqi officials sent crude oil prices sliding to their lowest levels since the day after the Persian Gulf crisis erupted.

On other markets, livestock and pork futures were higher, and grain and soybean futures advanced.

The news also sent precious metals prices down, since they are viewed as a safe-haven investment during times of war.

NYMEX February crude oil fell 58 cents to close at $24.90 a barrel, the lowest level since Aug 3. For the week, crude oil fell $2.67 a barrel, about 10%, as war fears were replaced by concern about a glut of crude.

On New York’s Commodity Exchange, which suspended trading for three hours, gold bullion for current delivery fell $1.60 an ounce to settle at $384.90.

The March silver contract closed down 6 cents at $4.207.

On New York’s Comex, silver bullion for current delivery settled at $4.155 an ounce, down from $4.214 on Thursday. In London the metal was quoted at an unchanged late bid price of $4.17 an ounce.

Corn prices at the Chicago Board of Trade settled 1.5 cents to 0.5 cent per bushel higher, with the active March contract leading the advance at $2.3375.

Soymeal gained $2.50 to $1.00 per ton, with spot January up $2.30 at $167.60. Soybean futures rose, with January up 6 cents at $5.645 a bushel.

Market Roundup, D6