FINANCIAL MARKETS : Stocks, Bonds Lukewarm Despite Reports

Stocks finished mixed Friday and bond yields eased, as investors failed to react with much enthusiasm to a new round of economic data showing inflation well under control.

The Dow Jones industrial average rose 20.52 points to 3,910.47, but much of that move was driven by a jump in shares of Alcoa, the Dow’s highest-priced stock.

In the broad market, losers narrowly beat winners on the New York Stock Exchange in slow trading of 253 million shares. Most broad market indexes were up marginally or down slightly.

In the bond market, the yield on the Treasury’s benchmark 30-year bond slipped to 7.83% from Thursday’s 7.85%, and shorter-term yields also eased.

Some traders were disappointed that investors didn’t step up to buy aggressively after the government reported that consumer prices rose a modest 0.2% in September.

In other news Friday, the nation’s industrial production level was reported to be unchanged in September.

Both reports suggested that the economy remains on a moderate growth path without serious inflation pressures. That should have relieved investor fears that the Federal Reserve Board will be compelled to raise short-term interest rates again soon.

“Because, at least temporarily, the marketplace believes inflation is not a problem, you can have more confidence in the underlying fundamental economic scenario, without fear of the Fed choking it off,” said Timothy Straus, manager of institutional sales at Hancock Institutional Services.

But traders said the stock market, at least, may well have anticipated the good news: The Dow had shot up earlier in the week, and with Friday’s gain the index was up 113.04 points for the week and within shouting distance of its all-time high of 3,978.36.

The Nasdaq composite of mostly smaller stocks, while down 0.81 point to 767.08 on Friday, still was up 17 points or 2.3% for the week.

Also, both stock and bond markets may have been held back Friday by another decline in the dollar. It sank to a three-month low against the German mark on expectations that Chancellor Helmut Kohl’s coalition will win Germany’s elections Sunday, thereby bolstering German stability.

A weak dollar makes it unlikely foreign investors will buy U.S. securities, for fear that their investments will be devalued.

In New York trading, the dollar was quoted at 1.520 marks, down from 1.529 Thursday, and at 98.20 Japanese yen, down from 99.47.

Among the market highlights:

* Industrial stocks getting a lift on expectations of a continuing economic expansion included Alcoa, up 3 5/8 to 87; Union Carbide, up 1 to 33 3/4; IBM, up 7/8 to 73 1/8, and Dow Chemical, up 1 3/8 to 76 1/8.

* In the tech sector, Intuit rocketed 17 1/8 to 67 3/8 one day after Microsoft agreed to buy the software company, which makes the popular home computer finance program Quicken, for $1.5 billion. Microsoft lost 1 5/16 to 55 15/16.

* Long Island Lighting led the actives list on the NYSE, rising 1 1/8 to 17 5/8, after New York Gov. Mario Cuomo suggested the state buy the utility for about $9 billion, or about $21.50 a share.

* McKesson tumbled 3 3/8 to 98 on worries that its sale to Eli Lilly & Co. will be delayed further.

Overseas, Tokyo’s Nikkei index fell 179.54 points to 19,969.29.

In Europe, Frankfurt’s DAX index gained 23.10 points to 2,105.73 in advance of Sunday’s elections, while London’s FTSE 100 index fell in profit-taking, dropping 35.2 points to 3,106.7.

In Mexico City, the Bolsa index added 18.08 points to 2,777.69.

In commodities trading, renewed worries about dry weather in Brazil fed violent swings in coffee and orange juice markets. November orange juice futures in New York jumped 9.45 cents to $1.05 a pound.

Elsewhere, crude oil prices closed modestly lower, capping a bearish week that pulled the November crude contract down $1.29 a barrel, or 7%. That contract eased 16 cents to $16.97 on Friday on the New York Merc.