Jobless Report Jitters Send Mixed Signals : Market Overview

* Long-term bond yields were pushed up by waves of selling ahead of today’s release of payroll and unemployment data.

* The dollar plummeted against major foreign currencies as investors went on a selling spree ahead of Friday’s employment figures.

* Stock prices closed mixed after computerized sell programs nearly erased a 17-point lead in the Dow Jones industrials.

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Short-term securities prices briefly spurted in the early going on a supportive Labor Department report, but retreated as worries over inflation reappeared in the market.

The yield on the Treasury’s 30-year bond rose to 6.96% from Wednesday’s 6.93%. Its price, which moves inversely to its yield, closed down 1/2 point, or $5.00 per $1,000 in face value.

The Labor Department said new claims for unemployment benefits shot up 33,000 in late March to 380,000. Many analysts had expected claims to fall about 2,000.

Ordinarily, such news spurs buying of government securities, since slow economic growth lessens the chance of higher inflation. Higher prices in the economy hurt the value of bonds.

However, comments from San Francisco Reserve Bank President Robert Parry dampened early enthusiasm among buyers of short-term bonds. Parry said the Fed may have to take action if the inflation rate, which has recently shown signs of growth, continues to rise.

The Fed has acted in the past to curb inflation by pushing up interest rates, and higher interest rates hurt the value of bonds.

Steven R. Ricchiuto, chief economist at Barclays de Zoete Wedd Government Securities Inc., said Parry’s remarks helped focus attention on a key indicator of inflation in Friday’s employment data for March. While the spotlight up to now has been on the reported increase in non-farm payroll jobs, traders now will also be looking at the average earnings of non-farm workers.

Also stoking inflation fears was a rise for the third day in a row in the Commodity Research Bureau index, which measures price changes in a broad array of commodity products. The CRB index rose 0.32 to 212.81. Next Thursday, the government reports its producer price index for March.

The federal funds rate, the interest on overnight loans between banks, was 3.333%, down from 4% late Wednesday.

Currency

The Japanese yen, after hitting record highs against the dollar nearly every day this week, quickly set another postwar record in Tokyo trading on the first day of Japan’s new fiscal year.

The selling fever spread through European markets, where the dollar plunged through an important psychological level against the German mark, and continued into New York trading.

“It was a feeding frenzy,” said Ken Gettinger, head of foreign exchange at Union Bank of Switzerland. When the dollar broke below 1.6000 marks, “you saw a quick liquidation of long dollars.”

Underscoring the technical selling pressure on the dollar was the fresh U.S. economic data that seemed to darken the outlook for today’s key employment figures.

In New York, the dollar finished at 114.04 Japanese yen, the dollar’s lowest close since modern currency exchange rates were established in the late 1940s. It closed on Wednesday at 114.75 yen.

The dollar settled at 1.592 German marks, down from 1.607. The British pound fetched $1.531, more than late Wednesday’s $1.515.

Stocks

The broader market fell in reaction to the rise in bond yields and fears that the nation’s employment picture may not be improving.

The Dow average was up 4.33 points to 3,439.44, though declining issues led advancers by about 9 to 8 on the New York Stock Exchange. Volume on the New York Stock Exchange was moderate at 234.53 million shares, down from 279.19 million Wednesday.

“Nothing is down that big and nothing is up that big,” said Paul Hennessey at the Boston Co. “The market’s just treading water.”

Today’s jobs report could be a catalyst for movement at least for the near-term, analysts said.

Demand for stocks may have been tempered Thursday by the National Assn. of Purchasing Management’s March index. It showed the economy growing, but at a slower pace than in February.

The purchasing managers’ index fell to 53.4% from 55.8% in February.

Among the market highlights:

* Time Warner slumped 1 5/8 to 33 1/8 after the Federal Communications Commission removed a ban that had prevented networks from holding a financial interest in the profitable rerun rights of programs. The company’s Warner Bros. unit was among firms that had criticized the decision.

* Other cable TV stocks fell after federal regulators ruled that most cable companies must cut basic subscription rates by at least 10%. Comcast lost 2 1/2 to 20 7/8, and Tele Communications slumped 2 to 20 1/2.

* Hutchinson Technology dropped 7 1/4 to 40. The brokerage house, Dain Bosworth, said it sees softening demand for suspension assemblies for disk drives, which are the company’s main products. The company controls 70% of the U.S. market for disk drives.

* Porta Systems fell 3 3/4 to 9. It said it is having trouble paying its debt, raising doubts about whether it can succeed in acquiring a telecommunications equipment maker.

* Primerica lost 1 3/8 to 44 3/4. The company sold 7 million shares overseas, and the shares were resold at an initial price range of 42 3/4 to 43 1/4 a share.

Meanwhile, in overseas trading, Tokyo stocks ended the first day of the new fiscal year sharply higher, with the Nikkei index closing at the highest level in a year. The 225-share Nikkei average soared 507.64 points, or 2.73%, to 19,099.09. Frankfurt’s 30-share DAX average finished 12.63 points down at 1,671.58. In London, the Financial Times 100-share average closed 0.3 of a point off at 2,878.4.

Commodities

Gold continued its recent advance. Gold for current delivery rose $1.10 an ounce to $338.70 on New York’s Commodity Exchange. Silver for current delivery rose 1.8 cents an ounce to close at $3.898 per ounce.

On the New York Mercantile Exchange, light, sweet crude oil for May delivery rose 8 cents to $20.52 a barrel.