Interest Jitters Cap Gains by Stocks

The stock market ended mixed Friday as fresh optimism about the economy was offset by fears of higher interest rates.

Major market indexes rose slightly for the day, but falling stocks outnumbered winners by almost 2 to 1 on the New York Stock Exchange.

The Dow Jones industrial average, which had soared nearly 144 points Thursday amid a flurry of robust corporate profit reports, struggled early Friday as Treasury bond yields jumped.

The bond market was riled by the government’s report that orders to factories for durable goods rose 3.4% in March, much more than expected. It was more evidence that the economy was accelerating. Bond investors fear that means the Federal Reserve could begin to tighten credit soon.

The yield on the 10-year T-note rose to a six-month high of 4.46% from 4.38% on Thursday.

The two-year T-note -- which is the most sensitive to changes in Fed rate expectations -- soared from 2.12% on Thursday to 2.24% on Friday, its highest level since October 2002. Bond yields rise as their prices fall.

Higher interest rates weighed on the stock market for about half the session, but key indexes moved up by the close.

The Dow ended with a gain of 11.64 points, or 0.1%, at 10,472.84.

The Standard & Poor’s 500 index edged up 0.67 point, or 0.1%, to 1,140.60.

The Nasdaq composite index showed more strength, rising 16.86 points, or 0.8%, to 2,049.77, helped by a rally in Microsoft.

The software giant’s shares surged $1.59, or 6.1%, to $27.54 after the company’s report Thursday that sales were up 17% in the first quarter, though profit was depressed by legal expenses.

For the week the Dow rose 0.2%, the S&P; 500 was up 0.5% and Nasdaq gained 2.7%. It was the first week since April 2 that all the major indexes rose.

Analysts said the market was struggling to come to grips with the likelihood of tighter credit.

“That is the main hurdle,” said Milton Ezrati, senior economic strategist at Lord Abbett & Co. “The market’s going to have to reconcile itself to the higher rates.”

Optimists say Wall Street can handle higher rates if corporate earnings continue to advance.

“The [earnings] numbers have been really good,” said Mark Donahoe, managing director of institutional trading at Piper Jaffray.

Quarterly results are now in from about half of the companies in the S&P; 500, and nearly 80% of those have beaten the forecasts of Wall Street analysts.

Among Friday’s market highlights:

* Insurance brokers were hurt on news that New York Atty. Gen. Eliot Spitzer, whose investigations of the mutual fund and stock research businesses led to industrywide reforms, was now investigating fees earned by brokers.

Marsh & McLennan, the world’s largest insurance broker, fell 98 cents to $45.01. Aon, the world’s No. 2 insurance broker, lost 94 cents to $27.82.

* Corning surged $1.88, or 18%, to $12.13, a day after the world’s largest maker of fiber-optic cable reported stronger-than-expected financial results.

* Amgen rose $1.17 to $58.31 after the biotechnology company said first-quarter profit exceeded analyst expectations as more doctors prescribed its Aranesp and Neulasta cancer drugs.

* Stocks sliding on disappointment over earnings reports included Amazon.com, which lost $2.57 to $46.29; Emulex, which slumped $2.11 to $17.48; and Autobytel, which dropped $2.79 to $10.51.

* Crude oil prices dipped 25 cents to $36.46 a barrel; gold edged up from a seven-week low.

Market Roundup, C4