Mixed Economic Signals Drive Dow Lower

Blue-chip stocks languished on Friday, as a mixed reading on a government employment report further clouded the near-term outlook for lower interest rates.

But the broad market ended mostly higher, continuing to take support from technology issues.

The Dow Jones industrial average declined 17.96 to close at 4,683.46, having hovered close to that level for most of the day. Advancing issues had a slim lead on decliners on the New York Stock Exchange. Volume was moderately heavy at 313.59 million shares as of 4 p.m., down from 353.12 million on Thursday.

Blue-chip stocks popped up at the open along with bonds, after the Labor Department reported that the nation’s unemployment rate rose by 0.1 percentage point, to 5.7 percent, in July.

But the Labor Department also reported that average wages rose seven cents an hour, suggesting that wage pressures are beginning to seep into the economy and could prove inflationary.

Blue-chip stocks turned tail in the first hour of trading and continued to erode throughout the session.

David Bostian, chief economist and investment strategist at Herzog, Heine, Geduld Inc. in New York, said there was “a lot of confusion” about the employment report, and that it did not offer much insight into whether the Federal Reserve will ease credit.

Some of the stocks that moved substantially Friday:

NYSE

Southern Pacific Rail Corp. rose 1-1/2 to 23-3/4.

Union Pacific Corp. rose 1-1/4 to 66-1/4.

Union Pacific agreed to buy Southern Pacific for about $4 billion in cash and stocks, plus the assumption of about $1.4 billion worth of Southern Pacific debt.

American Waste Services rose 1 to 4-5/8.

The stock gained 45 percent on Thursday. CNBC-TV correspondent Dan Dorfman cited rumors that H. Wayne Huizenga, the former head of Blockbuster Entertainment, may be considering a bid for the company. A recorded message at the company said its policy is not to comment on stock activity.

Cabletron Systems rose 2-7/8 to 52-3/8.

Cabletron on Thursday backed off from a hostile bid for Chipcom, paving the way for 3Com to acquire Chipcom in a previously announced pact. Chipcom’s shares fell 15/16 to 36-7/16 in Nasdaq trading, while 3Com’s shares rose to 70.

NASDAQ

Quantum Health Resources fell 4-11/16 to 14-1/8.

The company, which provides chronic disease management services, said Thursday that its second-quarter net income slipped to 20 cents per diluted share from 33 cents a year ago. The results were significantly below analysts’ estimates of 27 cents per share.

Pacific Dunlop rose 1/4 to 9-1/4.

The company sold most of its Pacific Brands Food division to Nestle SA and J.R. Simplot Co. for about $426 million.

AMEX

Polymedica rose 2-1/16 to 9-11/16.

CNBC-TV correspondent Dan Dorfman on Friday quoted a market source as saying that the company’s earnings will be boosted by new technology and marketing alliances, and that Bristol-Myers Squibb may be interested in acquiring the company, which makes wound-care products.