More Records in a Week of Records

U.S. stocks rose to records again Friday, closing out a week of milestones, as better-than-expected earnings reports offset the drag that Asia’s recession is putting on some companies.

Bond prices were mostly lower.

The dollar fell against the Japanese yen and the German mark on positive news out of Japan and Russia.

The Dow Jones industrial average rose 9.78 points to a record 9,337.97 after a nearly 94-point surge Thursday. For the week, it was up 232.79.

The technology-heavy Nasdaq composite index, which Thursday crossed 2,000 for the first time, rose 8.20 points to 2,008.76 for an eighth straight record close. The Nasdaq has surged nearly 300 points, or about 17.1%, in the last month, pushing this year’s gain to 27.9%.

The S&P; 500 also set a new high Friday, rising 2.76 points to 1,186.75, and the NYSE composite index rose 0.76 point to a record 600.75. But smaller-company shares lagged the blue-chip advance again. The Russell 2,000 index of smaller companies fell 1.28 points to 462.36.

“It appears that the recent strong upward advance is coming to a halt,” said Joe Battipaglia, chief investment strategist at Gruntal & Co.

Declining issues outnumbered advancers by a 10-9 margin on the New York Stock Exchange in heavy trading.

Earnings were again the key engine of activity, with better-than-expected profits at Microsoft and Sun Microsystems keeping big technology stocks humming.

But investors paused to digest news that the U.S. trade deficit hit a record high of $15.8 billion in May, up 10.3% from the previous month, with exports falling to their lowest level in 15 months.

“As we have seen for several months, the data from Asian markets was troubling,” Commerce Secretary Bill Daley said.

The ballooning trade deficit fueled speculation about a possible cut in interest rates by the Federal Reserve Board, which also supported stocks.

Wall Street investment banks slashed their estimates of the nation’s second-quarter growth, with some forecasting a drop in gross domestic product for the period because of the trade deficit.

“The big concern was the trade deficit figures that came out,” said Sam Stovall, sector strategist at Standard & Poor’s Corp.

“It caused some economists to believe that we may actually see negative GDP growth later this year, but I think it’s a little bit early to call for that,” he said.

In the bond market, the yield on the key 30-year U.S. Treasury bond rose to 5.74% from 5.72% on Thursday.

Money continued to flow into mutual funds, helping stocks. About $6.3 billion was added to U.S. stock mutual funds in the week ended Monday, up from $4.8 billion in the previous week, according to Trim Tabs Financial Services Inc., which tracks mutual fund flows.

“There’s this insatiable desire to put money to work,” said Vince Farrell, chief investment officer at Spears, Benzak, Salomon & Farrell. “As long as interest rates stay low, investors are saying that prices don’t matter.”

Among Friday’s highlights:

* Microsoft rose 56 cents to $117.94 and Sun rose $2.06 to $52 to lead the Nasdaq advance, along with fellow technology favorites Dell Computer, up $3.81 to $117.56, and Cisco Systems, up $4 to $99.75.

EMC, the world’s largest maker of computer data storage systems, helped boost computer shares, rising $4.19 to a record $52.44 after topping estimates with a 47% second-quarter profit increase.

Tellabs gained $1.94 to a record $86.69.

* PepsiCo rose $1.56 to $39.59 on a strong earnings report, but Gillette fell $2 to $58.38, despite meeting expectations, thanks to a downgrade from Merrill Lynch.

Others were buoyed in anticipation of their earnings reports due next week. IBM rose $1.81 to $120.19, Travelers gained 75 cents to $71.69 and Boeing rose $1.25 to $50.

In currency trading, the dollar fell to 139.47 yen from 139.94 yen at Thursday’s close and to 1.7800 German marks from 1.7855.

Investors bought marks on optimism that Russia’s chances of securing a big international aid package were improving and purchased yen as Japanese political leaders expressed their commitment to key economic reforms.

German companies and lenders have the closest international links to Russia, and the mark typically rises and falls with the prospects for Russian economic growth.

Overseas, Tokyo’s Nikkei stock average fell 1%, Frankfurt’s DAX index rose 0.9%, and London’s FTSE-100 rose 0.9% to a new high.

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Market Roundup, D4