The result at Molineux, coupled with Bolton's 2-1 victory over QPR earlier in the day, left Wanderers 19th in the Barclays Premier League table, a point adrift of safety with 10 games left to play.
The midlands club have won only one of their last 14 league fixtures, but Connor - who has been promoted from assistant manager to take over as boss for the rest of the season after the sacking of Mick McCarthy - says there is still plenty of belief in the camp.
"This leaves us second-bottom, but still with a lot of fight," Connor said.
"We spoke after the game and we still believe.
"One game doesn't make or break a season, so we will be in there and be competitive for the next 10 games."
Asked if he was certain the players he had at his disposal were good enough to stay up, Connor said: "I'm certain because we have done it for the last two years with a similar sort of group.
"This is their third attempt at it. It was always going to be a tight, hard season and that is why we must remain competitive.
"Regardless of the losses we suffer, we must remain positive so we can get enough points to remain above that dotted line come May 13."
Wolves, playing at their own ground for the first time since the humiliating 5-1 derby loss to West Brom a month ago which proved to be McCarthy's last game in charge, were looking to put a turbulent few days firmly behind them.
Their previous outing had been another heavy reverse, Sunday's 5-0 loss at Fulham, and club captain Roger Johnson had subsequently been punished for reporting to work on Monday unfit to train properly.
Two fine strikes from Junior Hoilett ensured Wanderers' misery continued, though, and Wolves fans - some of whom had staged a protest before the match - booed at the final whistle, at which point some banners had already been unfurled expressing their anger at the board who had decided to dismiss McCarthy.
There were further demonstrations outside the ground after the game, with club chairman Steve Morgan eventually going to speak to those involved.
Referring to the protests, Connor said: "It is not easy to ignore, but we are all employees of the football club so if there is a protest going on, I feel it is against all of us - players, staff, everyone concerned. We are all in it together."
Someone familiar with protests is Blackburn manager Steve Kean, with Rovers fans having frequently called for him to be sacked and held demonstrations against the club's hierarchy this season.
Things are now looking more positive for Kean - his side have moved up to 16th, three points clear of the relegation zone - and the Scot said: "Fans get frustrated.
"Our travelling supporters have been sent home happy and there have been tough times this season where the performances have been good but we haven't been getting the points, and they have got frustrated.
"I feel for Terry, but you just have to keep working hard - get back on the training ground and work it out. That is certainly what we have done."
Hoilett put Blackburn in front in the 43rd minute with a well-executed shot after Wolves' David Davis had only been able to flick on a throw into the box from Rovers midfielder Morten Gamst Pedersen, and the Canadian forward then fired in a second from 25 yards in the 69th minute.
Kean was delighted with his team's efforts, particularly as they managed to keep a clean sheet for the first time this season.
"I felt as though probably we should have got another couple of goals, but what impressed me was the work ethic of the team," Kean said.
"Junior Hoilett will get the headlines for his performance, but I felt right from (goalkeeper) Paul Robinson, through the back four and into the midfield unit, our work off the ball was really good and I think that gave us a platform to go and get a clean sheet, which we have been working so hard to get."