Most stocks inched higher Thursday, boosted by lower bond yields, but investors stayed pretty much on the sidelines ahead of today's employment data.
Stocks rose early in the session as interest rates fell in reaction to economic data that showed inflation cooling. But the Dow Jones industrial average of big blue chip stocks settled back late in the morning as investors cooled their buying in anticipation of today's release of non-farm payroll and unemployment data for May.
"After being burned the past couple of months by the employment figures, investors are a little gun-shy about making big bets before the numbers come out tomorrow," said James Solloway, research director at Argus Research Corp.
The Dow closed the day at 3,758.99, down 1.84, after trading within a 15-point range all day.
However, advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange, where volume totaled 271.63 million shares, down from 278.51 million on Wednesday.
Broad-market indexes outperformed the Dow blue chip gauge. The NYSE's composite index rose 0.23 to 253.08, while Standard & Poor's composite index of 500 stocks rose 0.02 to 457.65. The Nasdaq index of mostly smaller issues rose 3.98 to 739.50.
Bonds firmed after three government economic reports came in about as expected. The bellwether 30-year bond fell to 7.34% from 7.39% on Wednesday, while its price, which moves in the opposite direction, rose 15/32 point, or $4.69 per $1,000 in face value.
"It was very light volume ahead of tomorrow's employment" report, said Alan Levanson, money market economist at UBS Securities Inc. in New York.
Some data released Thursday gave a mild boost to the bond market, some traders said, by indicating subdued economic growth. Bond investors tend to sell on signs of slower growth, believing that will tame inflation, which erodes the value of fixed-income securities.
The Commerce Department said its chief forecasting gauge, the index of leading economic indicators, was unchanged in April, another sign of a slowing economy.
The department also reported that orders to U.S. factories declined 0.1% in April, the second drop in three months.
In a third report Thursday, the Labor Department said the number of first-time unemployment claims declined by 4,000 last week, the third consecutive weekly drop. But the four-week moving average of weekly claims was up to its highest level in more than three months.
A strengthening in the dollar was also cited by some traders as helping to push bond prices higher.
The dollar broke out of a narrow range against the mark, fetching 1.653 marks in New York, up from Wednesday's 1.645. Some traders attributed the rise to technical factors and optimism about today's employment figures. Against the Japanese yen, the greenback rose to 104.85 yen from 104.55.
Some traders also said overseas players were rumored to be moving into the U.S. bond market to escape fluctuations in the fixed-income arena in Europe, pushing U.S. bond prices up.
Today, analysts expect the Labor Department to report non-farm payrolls for May to have risen between 275,000 and 300,000, and for the unemployment rate to have remained unchanged at 6.4%. If the jobs numbers come in higher than expected, indicating that the economy is heating up too fast, bond yields will probably rise and depress stocks, analysts said.
Higher employment data would stir fears of inflation, which bond investors don't like because it erodes the value of fixed-income securities. Stocks and bonds have been trading in close tandem for some time.
The Federal Reserve Board has indicated it will closely scrutinize economic data, especially employment figures, to determine whether to raise interest rates again.
"That suggests that it's probably time for people to take a little step back here, take a little bit off the table and see what happens tomorrow," said James Schroeder, a stock analyst at MMS International in Chicago.
Among the market highlights:
* Among retail stocks, Sears fell 1 3/4 to 50 despite an 8.8% rise in May sales at stores open at least a year. Wal-Mart ended off 1/8 at 22 3/4. Its discount stores' sales rose 8.2% gain, but sales at its Sam's Club unit fell 6.2%.
J.C. Penney fell 2 to 49 3/4. The company said sales at its flagship stores open at least a year rose 5%, while total sales, including its drugstore and catalogue operations, rose 6.8%.
* Best Buy jumped 1 3/8 to 30 3/8 on a 30% sales increase.
* International Business Machines fell 1 3/8 to 62 1/8. Dean Witter downgraded the stock to "neutral" based on the price of IBM's shares relative to its earnings, market sources said.
* U.S. Surgical dropped 2 to 19 3/4 on investor disappointment after Swiss drug and chemical giant Ciba-Geigy said it has no intention of acquiring the firm. U.S. Surgical had climbed 2 3/4 on Wednesday amid takeover speculation.
* Fluor added 2 to 53 3/4 on strong second-quarter earnings.
London's Financial Times 100-share average rocketed 48.9 points, its biggest one-day gain of the year. The index bounced back from yesterday's 38.7-point tumble to 2931.80, which was its lowest close since Aug. 4, 1993. The Frankfurt bourse was closed for a one-day holiday.
In Tokyo, the 225-share Nikkei average ended down 44.11 points at 21,009.00, after having climbed as high as 21.198.74, above the 1993 closing high, while Mexico City's Bolsa index ended 7.08 points higher at 2,446.06, a gain of 0.29%.
Meanwhile, in the precious metals market, gold rose on the New York Comex to $384.20 an ounce, up 70 cents. Silver fetched $5.369, up from $5.333 on Wednesday.
Market Roundup, D6