Stocks end mixed amid positive data

Wall Street closed out a volatile week with a mixed performance Friday after a pair of economic reports damped hopes for an interest rate cut anytime soon. The major indexes were down for the week.

Stocks found some late-day strength as investors sought bargains after a two-day pullback that erased most of the market’s 2007 gains.

An upbeat outlook from heavy machinery maker Caterpillar lent some support to the Dow Jones industrial average. However, those gains were offset by economic reports that raised concerns about interest rates.

The Commerce Department said new-home sales rose 4.8% in December, well above economists’ projections, suggesting that the slumping housing market might have bottomed out. The department also said orders to U.S. factories for big-ticket manufactured goods rose in December by the largest amount in three months, led by demand for commercial aircraft.

Investors had been holding on to hopes that the Federal Reserve might cut rates in the first half of the year. However, a steady stream of positive economic reports, such as those issued Friday, are making that unlikely and instead raising the possibility that the Fed might resume its campaign of rate hikes that ended in August. Fed policymakers meet next week.

“The biggest driver is concern the Fed might see more reasons to raise rates than to lower,” said Arthur Hogan, chief market analyst at Jefferies & Co.

The Dow index was down 70 points early in the day but rebounded to end down 15.54 points, or 0.1%, at 12,487.02.

Broader stock indicators were mixed. The Standard & Poor’s 500 index was down 1.72 points, or 0.1%, at 1,422.18, and the Nasdaq composite rose 1.25 points, or 0.1%, to 2,435.49.

Long-term bonds were little changed, with the yield on the benchmark 10-year Treasury note edging down to 4.87% from 4.88% on Thursday. Bond yields climbed sharply Thursday as the belief that the Fed would stand pat on short-term rates took hold.

Oil prices rose after a steep decline in the previous session because of doubts about production cuts that OPEC members promised last year. Crude oil futures rose $1.19 to $55.42 a barrel.

Friday’s performance capped a week in which the stock market shuttled from optimism about corporate earnings and a possible interest rate cut in the first part of the year to dejection over an economy that could be strong enough to force a rate hike. Generally good earnings reports were cast aside while investors focused on the Fed’s likely moves.

For the week, the Dow, the S&P; 500 and the Nasdaq index each gave up 0.6%.

Steven Goldman, chief market strategist for Weeden & Co., said the retreat in stocks should offer buying opportunities. He said that the market wasn’t “terribly overbought, but had been listlessly moving up” and that “pulling back allows the market to clean out its excess.”

For the year, the Dow is up 0.2%, the S&P; is up 0.3% and the Nasdaq is up 0.8%.

In other market highlights:

* Caterpillar, whose earnings are tracked as an indication about the pace of U.S. construction, rose $1.46, or 2.5%, to $61.09 after it reported a 4.3% rise in fourth-quarter profit and sounded optimistic about 2007.

* Honeywell International, a diversified high-tech manufacturer, posted a 14% jump in fourth-quarter profit. However, lackluster 2007 projections sent its shares down 7 cents to $44.13.

* Some technology stocks rose after Microsoft reported fiscal second-quarter results that beat Wall Street expectations, and projected double-digit growth in all of its core businesses through the rest of the year that ends June 30. Strong sales of its Xbox video game console helped offset the delayed release of its latest operating system, Vista.

Microsoft rose 15 cents to $30.60. The stock is up 2.5% this year.

Also in the tech sector, El Segundo-based semiconductor producer International Rectifier surged $4.74 to $42.37 after its earnings topped expectations.

* Thousand Oaks-based Amgen declined after the world’s largest biotechnology company said its fourth-quarter profit had missed projections. The stock fell $3.35, or 4.5%, to $71.50.