Stocks closed mixed Friday in very heavy trading as a discount rate cut allowed most stocks to overcome early weakness tied to January job data, with the Dow industrials lagging slightly.

The Dow Jones industrial average, which jumped 23.27 Thursday, lost 5.70 to close at 2,730.69.Among broader market gauges, the New York Stock Exchange composite index eased 0.19 to 187.40 and the Standard & Poor's 500-stock index lost 0.88 to 343.05. The price of an average share fell 3 cents.

Advances led declines 1,007-591 among the 2,027 issues crossing the NYSE tape. Big Board volume totaled 246,670,000 shares, compared with the 204,240,000 traded Thursday.

Stocks opened lower and fell steadily in early trading after a much weaker-than-expected report from the Labor Department on last month's job picture, which showed the jobless rate rose to 6.2 percent in January from 6.1 percent the month before.

But more disturbing was the reported sharp drop in non-farm payroll employment, which declined 230,000 last month against expectations of a drop of 15,000. Non-farm payrolls have fallen about 1 million since June, the government said.

The news sparked fears that the recession may not be as short as people had recently come to believe, and the Dow was down more than 25 points at its low as traders took profits.

Following the news, however, the Federal Reserve cut the discount rate to 6 percent from 6.5 percent, citing "further declines in economic activity" and "abating inflationary pressures."

Major banks followed up on the Fed's move by cutting the prime rate to 9 percent from 9.5 percent.

The rate cuts allowed most stocks to recover their losses, but the Dow remained slightly lower as traders continued to take profits after the average's recent sharp advance - 75 points over the pervious two sessions.

Analysts said the persistent credit crunch also played a part in the Fed's decision to cut rates.

"Banks are sitting on money and have nothing to use it for because borrowing has retrenched," said Don Hays, director of investment strategy at Wheat, First Securities Inc. in Richmond, Va.

"So today the Fed got hit over the head with a two-by-four when the employment figures came out and was forced to lower the discount rate. Banks showed how hungry they were for business by immediately lowering the prime," he said.

Hays said small stocks, which paced the market, did so because investors felt they would benefit most from easier credit conditions. "The lower rates will be the elixir of growth for them over the next six months," Hays said.

On the trading floor, USX was the most active issue, off 13/4 to 291/2 after directors agreed Thursday pending shareholder approval to divide its stock into separate securities for the company's steel and energy businesses.

Philip Morris followed, up 11/4 to 567/8. Chase Manhattan was third, up 7/8 to 123/4.

Marriott was also active, surging 23/4 to 13 after announcing agreements for an expansion of its bank credit facilities and the sale of 165 family restaurants.

Among the other blue chips, AT&T fell 1 to 315/8, IBM rose 1/8 to 1267/8, General Electric was unchanged at 64 and McDonald's added 1/8 to 285/8.

Prices gained in active trading on the American Stock Exchange.

The Amex Market Value index rose 1.49 to 319.03. Advances led declines 381-222 among the 803 issues traded. The price of an average share gained 5 cents. Volume totaled 13,200,000 shares vs. 14,780,000 traded Thursday.

Hillhaven led Amex issues, unchanged at 13/4.

The National Association of Securities Dealers composite index rose 3.49 to 417.69.