Dow Rises in Cautious Trading

Buyers cautiously returned to Wall Street on Friday, sending stocks higher on bargain hunting after three days of losses. But the market’s three main indexes still posted a fourth straight weekly decline.

Analysts said investors were ambivalent about the strength of the economic recovery and third-quarter profits. After disappointing earnings announcements this week from McDonald’s, Electronic Data Systems and J.P. Morgan Chase, the market got a boost on a positive outlook from Qualcomm.

“I think what we’re seeing is a tug of war between one camp looking for the economy and corporate earnings to fall significantly further from where we are, and the other camp looking for the economy to expand, albeit on a modest path,” said Kevin Caron, market strategist at Ryan, Beck & Co.

The Dow Jones industrial average rose 43.63 points, or 0.6%, to 7,986.02. On Thursday, the Dow dropped 230 points to close below 8,000 for the first time since July 23.

The broader market also finished higher. The Nasdaq composite index rose 4.64 points, or 0.4%, to 1,221.09. The Standard & Poor’s 500 index inched up 2.07 points, or 0.3%, to 845.39.

Winners edged out losers on Nasdaq and the New York Stock Exchange. Trading was brisk because Friday was what is called a triple-witching session, the quarterly expiration of index futures and index and stock options. But there was little of the price volatility that often accompanies triple-witching days.

The three major market gauges all finished the week lower for a fourth straight week, the first such streak for the Dow and S&P; 500 since the period ended June 21. For the week, the Dow lost 3.9%, the Nasdaq declined 5.4% and the S&P; 500 fell 5%.

Analysts say investors remain focused on the economy and have increasingly lost confidence in the last month because of mixed economic reports, a possible war with Iraq and disappointing earnings news.

Since hitting a peak Aug. 22, the Dow has lost more than 1,000 points, about 400 of which came in the last three sessions before Friday.

“The bottom line seems to be that U.S. stocks are stuck in a trading range and that we still don’t know when the economy and corporate profits will truly start to recover in a sustainable way,” said Stuart A. Schweitzer, global investment strategist for J.P. Morgan Fleming Asset Management.

The third quarter is showing a reversal of a recent trend in which profit warnings from companies had been declining and positive outlooks had been increasing, according to Thomson First Call.

Of 874 pre-announcements this quarter, 457 companies have released negative outlooks, 208 have been on target and 209 companies have had positive forecasts, the research firm said.

Analysts expect third-quarter operating earnings at companies in the S&P; 500 to rise 8.5% from the year-earlier period, according to First Call. That’s down from Wall Street’s expectations of 10.9% growth just one week ago.

The Federal Reserve is expected to keep interest rates steady when it meets Tuesday. Still, analysts expect the Fed to keep its risk assessment weighted toward economic weakness.

Friday’s gainers included Qualcomm, which climbed $2.36 to $28.08 after the telecommunications equipment maker said it expected first-quarter shipments of phone chips to be significantly higher than 20 million. Alcatel, another telecom equipment firm, rose 16 cents to $2.61 after saying it would cut 10,000 more workers by the end of 2003 and warning that sales would fall by 36% this year.

Losers included Duke Energy, which fell $1.02 to $20.40, after lowering its 2002 earnings estimates below analysts’ expectations.

Among other energy shares, Mirant lost 19 cents to $2.32, and Calpine declined 3 cents to $3.44. Dominion Resources, another utility that this week said 2003 profit would fall short of forecasts, lost 50 cents to $50.

Texas Instruments sank $1.25 to $15.78. Investment bank Salomon Smith Barney cut its rating on the chip maker, citing a soft outlook for semiconductors and personal computers.

Reuters was used in compiling this report.

Market Roundup, C4-5