Major Indexes Gain for Second Straight Week

Turning cautious after Wall Street’s two-day rally, investors left stocks mixed Friday, taking some profits in blue-chip issues and doing some buying in the tech sector. Still, the major stock indexes scored their second straight weekly advance, an achievement not seen in five months.

“The market is snapping back now, showing more resiliency,” said Larry Wachtel, market analyst at Prudential Securities.

Meanwhile, yields on Treasury securities spiked as investors abandoned the low-yielding sector in favor of the rebounding equity market.

The Dow Jones industrial average closed down 40.08 points, or 0.5%, at 8,778.06. The loss was attributable largely to profit taking after the Dow’s two-day gain of 335.75 points.

Broader market indexes finished mixed. The Nasdaq composite index rose 16 points, or 1.2%, to 1,361.01, having advanced 75.73 points in the previous two sessions. The Standard & Poor’s 500 index fell 1.48 points, or 0.2%, to 928.77.

Winners led losers by about 9 to 7 on both Nasdaq and the New York Stock Exchange. Trading volume was modest.

The market’s three major gauges claimed their second straight weekly advance, a feat they last accomplished in the two-week period ended March 8. Nasdaq was the week’s biggest winner, surging 4.2%. The S&P; had a weekly advance of 2.2%, while the Dow gained 0.4%. For the S&P; 500, it was the fourth straight weekly gain--something that hasn’t happened since March 2001.

Market observers attributed the recent gains to signs that the market found a bottom in late July. The advance also reflected investors’ relief that most of the nation’s biggest companies were able to comply with a government deadline Wednesday to certify their financial results. Although the final count has not been completed, hundreds of chief executives affirmed their companies’ numbers with few delays or restatements.

“The passage of Aug. 14 should not be underestimated,” said Henry Cavanna, investment manager at J.P. Morgan Fleming Asset Management.

“We’ll look back over time and see the issue of corporate trust was the pinnacle of worry and concern. [This deadline] removes a worry from the market and that’s a positive.”

Wachtel said that stock prices finally are appearing attractive to investors and that investments that had been more in favor, such as bonds and money markets, are becoming less attractive.

“Stocks relative to everything else look reasonable,” Wachtel said. “You have institutional investors saying, ‘Too many bonds, not enough stocks,’ and individuals saying, ‘I am not sure about stocks, but how long can I live on 1%’ ” in certificates of deposit or money markets.

This week, the yield on the benchmark 10-year Treasury note plunged to levels not seen since the early 1960s. It has rebounded a bit, rising Friday to 4.32% from Thursday’s close of 4.18%.

“There’s an unwillingness to drive yields to the lows hit earlier in the week,” said Mike Kastner, fixed-income manager at Deutsche Bank Private Banking. “We’re too low” in yields across all maturities.

Disappointing economic reports, including weaker-than-expected consumer sentiment and a decline in home construction, contributed to Friday’s lackluster tone on Wall Street.

On a positive note, the Labor Department reported that consumer inflation inched up 0.1% in July, lower than the 0.2% rise that analysts were expecting.

In other trading, the dollar was mixed, rising against the Japanese yen while weakening against the euro. Oil prices remained above $29 a barrel for a second day, rising 27 cents to $29.33.

Among the day’s highlights:

* Technology got a lift from Texas Instruments, rising $1.69 to $21.99 after reconfirming its third-quarter earnings outlook. Also, Analog Devices rose $2.50 to $26.50 after the microchip maker said revenue stabilized despite a sluggish semiconductor market. A key index of chip stocks jumped 6.4%, and No. 1 chip maker Intel rose 14 cents to $18.75.

* Dell Computer also gave tech shares a boost, rising 39 cents to $27.53 the day after it reported a 27% increase in second-quarter profit.

* Retailers were mixed. Target rose 44 cents to $35.54, the day after reporting a 27% increase in second-quarter profit. But American Eagle Outfitters tumbled 98 cents to $14.79 after Morgan Stanley downgraded the stock. And Gap slumped $1.34 to $11.66 after the largest U.S. specialty apparel retailer posted a drop in earnings and said its early August sales were below projections.

* Alcoa dragged on the Dow with a drop of 66 cents to $24.77 after Morgan Stanley cut the company’s earnings estimates, citing concern about economic weakness and recent slackness in aluminum prices.

Market Roundup, C4-5