Stock Rally Fizzles in the End

Stocks ended mostly lower Friday as some upbeat economic data sent interest rates up and oil prices rose for a fourth day.

The yield on the 10-year Treasury note jumped to 4.68%, up from 4.63% on Thursday and the highest since June 2004.

The stock market ignored higher rates for much of the day. The Dow Jones industrial average traded as high as 11,106, up 81 points from Thursday’s close. Some broader indexes reached record highs during the day.

But the rally faded by the close. The Dow ended with a loss of 3.92 points at 11,021.59.

The broader Standard & Poor’s 500 slipped 1.91 points, or 0.2%, to 1,287.23.

The technology-heavy Nasdaq composite gave up 8.51 points, or 0.4%, to 2,302.60, hurt in part by Intel, which warned of a revenue shortfall.

Declining stocks outnumbered winners by about 3 to 2.

In recent weeks, stock investors have been alternately encouraged and discouraged by healthy economic data. On the one hand, the global economy’s resilience suggests that corporate earnings could continue to advance. But that resilience has been putting upward pressure on interest rates worldwide.

On Thursday, the European Central Bank raised its key short-term rate to 2.5% from 2.25%. Next week, the Bank of Japan is expected to signal that it will begin to slowly lift rates.

An index of activity in the service sector of the U.S. economy showed surprising strength in February, a report Friday said.

Also, Federal Reserve Vice Chairman Roger Ferguson said in a speech that the economy was “solidly on track,” which raised the specter of more rate increases by the Fed.

Investors sold Treasury bonds, driving yields higher. The two-year T-note ended at 4.75%, up from 4.71% on Thursday and the highest since 2001.

The bond market “has been priced for bad news economically, which just isn’t coming through,” said Harry Harrison, global head of U.S. interest rate products at Barclays Capital.

Also, higher oil prices this week have fanned inflation fears. On Friday, crude futures in New York rose 31 cents to $63.67 a barrel, highest since Feb. 6. The Organization of the Petroleum Exporting Countries meets next week to discuss supply issues.

Bond traders will be watching next week to see how much higher the 10-year T-note yield rises. Since 2002, investors have jumped in to buy the notes whenever the yield has exceeded 4.6%.

“If we see anything above 4.75%, approaching 5% ... investors should be all over it,” said Joe Keating, investment chief at First American Asset Management in Birmingham, Ala.

As for stocks, market bulls say there are few signs that investors want to flee.

For the week, the Dow eased 0.4%, the S&P; 500 lost 0.2% and Nasdaq gained 0.7%.

Among the day’s highlights:

* Indexes reaching all-time highs during trading Friday, before sliding at day’s end, included the New York Stock Exchange composite, the Russell 2,000 small-stock index and the Dow transportation index. Year to date, the NYSE index is up 4.7%, the Russell is up 9.7% and the Dow transports are up 7.5%.

By contrast, the Dow industrials are up 2.8% this year, the S&P; 500 is up 3.1% and Nasdaq is up 4.4%.

* Intel’s sales warning left its shares down 17 cents at $20.32. The stock had tumbled in recent weeks on expectations of weakness.

Other chip stocks were mixed. The sector has soared this year. Micron Technology added 4 cents to $15.89 and QLogic gained 6 cents to $20.79. Broadcom fell 21 cents to $48.63.

* Some industrial stocks continued to rise on optimism about the economy. Deere jumped 72 cents to $78.38, Ameron rose 95 cents to $61.81 and Parker-Hannifin gained 69 cents to $80.52.

* Glendale-based American Reprographics, a document-management firm, soared $2.64 to a record $32.64 after quarterly earnings beat estimates.