Small Caps Gain; Blue Chips Drop
A weaker economic growth figure and a flurry of late-day trading left stocks widely mixed Friday, with smaller shares and tech issues gaining as blue chips suffered. The major indexes also finished the week mixed.
Trading volume surged as big investors adjusted their portfolios for the annual rebalancing of the Russell stock indexes.
The government revised its reading of first-quarter gross domestic product growth down to 3.9% from its previous estimate of 4.4%.
Investors put a mixed spin on the report. Some believed the lower figure would mean moderate interest rates ahead, while others questioned the strength of the economic recovery.
In the near-term, most analysts said, the revision would keep the Federal Reserve from raising its benchmark short-term rate aggressively at its meeting next week. Wall Street is expecting a quarter-point increase, from 1% to 1.25%, when the two-day meeting concludes on Wednesday.
“I think at this point, a half-point raise is off the table,” said Daniel Portanova, managing director at Gartmore Separate Accounts in Irvington, N.Y. “And I think the market will be comfortable with a quarter-point rate hike, especially after seeing this number.”
Wall Street suffered some volatility in the last hour of trading as institutional investors bought and sold stocks to rebalance portfolios tied to the Russell stock indexes. Those indexes are changed every year at this time to reflect shifts in companies’ market values.
As some investors snapped up small-company shares, the Russell 2,000 index jumped 8.65 points, or 1.5%, to 587.70.
Another small-stock index, the Standard & Poor’s 600, rose 2.92 points, or 1%, to 293.07 -- just below its record closing high of 293.64 on April 5.
The Nasdaq composite, also home to many small stocks, gained 9.90 points, or 0.5%, to end at 2,025.47.
By contrast, blue-chip indexes were lower. The Dow Jones industrials lost 71.97 points, or 0.7%, to 10,371.84. The S&P; 500 was down 6.22 points, or 0.6%, at 1,134.43.
Rising stocks outnumbered losers by 6 to 5 on the New York Stock Exchange and by 7 to 5 on Nasdaq.
For the week, the Dow eased 0.4% and the S&P; 500 slipped 0.1%, while the Nasdaq jumped 2%. The Dow ended a four-week run of gains, and the S&P; 500 had its second consecutive losing week. The Nasdaq reversed last week’s decline.
With three trading days to go in the first half, the Dow is down 0.8% since Jan. 1, the S&P; 500 is up 2%, Nasdaq is up 1.1% and the S&P; index of smaller stocks has risen 8.4%.
U.S. Treasury yields were little changed Friday. The yield on the benchmark 10-year note was 4.65%, the same as Thursday and down from 4.71% a week ago.
Gold slipped but stayed above $400 an ounce on concerns about violence in Iraq and elsewhere in the Middle East. Crude oil closed 38 cents lower at $37.55 a barrel in New York.
Among Friday’s market highlights:
* The Dow was pulled down by GE, off $1.09 to $32.18; Exxon Mobil, off $1.02 to $44.25; and Johnson & Johnson, which fell $1.19 to $54.50. Big drug stocks in general were weak.
* Some Internet-related shares attracted buyers. Winners included Ebay, up $1.98 to $90.72; Ask Jeeves, up $1.48 to $37.97; and Digital River, up $1.28 to $32.59.
* Athletic apparel giant Nike jumped $2.91 to $75.31 after posting a 21% rise in quarterly profit and handily beating Wall Street earnings expectations by 5 cents a share.
* Countrywide Financial rose as high as $71.98 after announcing a 2-for-1 stock split. The shares ended down 21 cents at $71.09.
* Cabela’s, a Nebraska-based sporting goods retailer, shot up $6 to $26 on its first day of trading. The company went public on Thursday, raising $156 million.
* Companies with asbestos liability advanced after Senate Democrats proposed a resolution to a legislative stalemate over a trust fund for compensating asbestos-exposure victims. W.R. Grace gained 58 cents to $6.50. McDermott International added 34 cents to $10.21.
* Education stocks were up modestly after sinking Thursday on concerns about government probes of some of the companies. Corinthian Colleges added $1.08 to $23.59; ITT Education gained $1.63 to $37.54.
* Arden Group, parent of the Gelson’s and Mayfair supermarket chains in the Southland, jumped $4 to record $88.95. There was no apparent news.
