Blue Chips’ Week Is Best Since Sept.
Blue-chip stocks shrugged off early losses Friday to rack up their fourth day of gains and cap their best week in nearly a year. But technology stocks slid as a sales warning from Costa Mesa-based Emulex reminded investors that the profit outlook for corporate America is still cloudy.
“The fundamentals haven’t improved, and the tech picture hasn’t improved,” said Frederick Sears, a fund manager at Eastern Point Advisors.
The Dow Jones industrial average gained 33.43 points, or 0.4%, to 8,745.45. The broader Standard & Poor’s 500 index rose 3.18 points, or 0.4%, to 908.64, and the technology-laden Nasdaq composite index fell 10.40 points, or 0.8%, to 1,306.12.
Winners led losers by 5 to 4 on the New York Stock Exchange, while losers outnumbered winners by 4 to 3 on Nasdaq.
For the week, the Dow climbed 5.2%, giving the blue-chip gauge its largest percentage weekly gain since a late-September jump after the Sept. 11 attacks.
The S&P; 500 gained 5.1% for the week. It was the third straight winning week for the Dow and S&P; 500. Despite Friday’s loss, Nasdaq rose 4.7%, snapping a five-week losing streak.
Trading was light Friday as investors sat on the sidelines in advance of Tuesday’s Federal Reserve meeting. Stocks gained this week, in part, on hopes that the Fed will cut interest rates in an attempt to lift the economy.
Most economists do not expect the central bank to cut as early as next week, but Morgan Stanley’s chief U.S. economist bucked the trend, saying he thinks the Fed will lower its target rate by half a percentage point.
“The single biggest thing that fueled this week’s rally was speculation the Fed will be more aggressive, and that we could see a cut as early as Tuesday,” said Phil Orlando, chief investment officer at Value Line Asset Management. “It is our view that expectation is inappropriate.”
Growing skepticism about a rate cut helped push up yields on shorter-dated Treasury securities, while yields on longer-term Treasuries plummeted. The yield on the six-month Treasury bill inched up to 1.59% from 1.58% on Thursday, while the yield on the benchmark 10-year T-note fell to 4.26% from 4.39%--its biggest one-day slide in six months.
In the latest economic news, the Labor Department reported Friday that the productivity of U.S. workers grew in the second quarter, but at a sharply slower pace than the beginning of the year.
Emulex kept the pressure on technology stocks, falling $8.34, or 35%, to $15.27, making it the biggest percentage loser on Nasdaq and pulling down shares of rival data storage equipment makers. Emulex said it expects sales to be weaker than analysts expected amid a difficult environment for business spending.
Worries over corporate scandals remain near the top of Wall Street’s list of concerns, heightened by WorldCom’s disclosure late Thursday of more accounting problems. The news came only days before Wednesday’s deadline for top officers of almost 1,000 big U.S. companies to certify their financial results to the Securities and Exchange Commission.
In other trading, the dollar eased against the euro and the Japanese yen, while gold and oil futures rose.
Among Friday’s highlights:
* Gold-mining stocks rallied as the price for the metal rose. Newmont Mining added $2.05 to $26.78, and Freeport-McMoRan Copper & Gold rose 98 cents to $16.19. The Amex index of gold stocks climbed 6.1%.
* U.S. Laboratories surged $4.59, or 47%, to $14.39 and ranked as the biggest percentage gainer on Nasdaq. France-based Bureau Veritas said it had agreed to buy the quality-control services provider for $83 million.
* Best Buy bounced up $1.71 to $21.26, recouping part of Thursday’s 36% loss suffered when the retailer cut its profit outlook for the second time in two months as consumers curtailed spending.
BellSouth, the third-largest local phone company, fell 65 cents to $23.95. Phone stocks were the worst-performing industry group in the S&P; 500 this week, with BellSouth dropping 7.7% and Verizon Communications declining 5.4%. Verizon rose 55 cents to $30.25 on Friday.
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Market Roundup, C4-5
