Big indexes slip but still end quarter on plus side

Wall Street on Friday wrapped up a wild quarter with modest losses. But the bulls still seem to be in charge.

A fresh surge in gold and another plunge in the dollar put exclamation points on the quarter’s moves in those markets.

In the stock market, the Dow Jones industrial average fell 17.31 points, or 0.1%, to 13,895.63 and the Nasdaq composite index eased 8.09 points, or 0.3%, to 2,701.50.

But both indexes recorded strong gains for the quarter. The Dow jumped 3.6% and the technology-heavy Nasdaq rallied 3.8%.

The Dow is just 105 points below its record high of 14,000.41 reached in mid-July.

The Standard & Poor’s 500 lost 4.63 points, or 0.3%, to 1,526.75, on Friday but was up 1.6% for the quarter.

Small and mid-size stock indexes rebounded from their August lows but still lost ground for the quarter. The Russell 2,000 small-stock index dropped 1.1% on Friday and was off 3.4% in the quarter, paring its year-to-date gain to 2.3%.

By contrast, the Dow is up 11.5% this year, the Nasdaq is up 11.8% and the S&P; 500 is up 7.6%. Bigger stocks in general have been in favor since midyear as many investors have sought relative safety, analysts say.

The market overall bounced back from a sharp decline that lasted from mid-July to mid-August amid a deepening global credit crunch rooted in the housing sector’s troubles. Investors fled stocks and other risky assets, fearing that the financial system was coming unraveled.

The panic subsided, however, after credit-easing moves by the Federal Reserve and other central banks worldwide.

Few experts are willing to sound the all-clear signal, particularly with home sales and prices still declining.

“We have tentative signs that the financial markets are beginning to recover from the recent upset, but financial fragility is obviously still an issue,” St. Louis Fed President William Poole said in prepared remarks Friday in New York.

Nonetheless, many investors believe that the worst has passed -- or that the Fed will cut rates again if the situation darkens.

“A second Fed cut will go a long way in reassuring the stock market that the worst is over,” said Janna Sampson, director of portfolio management at Oakbrook Investments in Lisle, Ill.

But Poole warned that markets shouldn’t “bake into the cake” the prospect of more rate cuts.

Some upbeat economic reports Friday, including a surprisingly strong rise in U.S. consumer spending in August, suggested that the central bank could stay on hold with rates.

The Treasury bond market, however, still seems to be betting on additional Fed cuts. The six-month T-bill yield ended Friday at 4.07%, up from 4.04% on Thursday but still far below the Fed’s benchmark short-term rate, now 4.75%.

The 10-year T-note yield ended at 4.59%, up from 4.57% on Thursday but down from 5.03% at the end of June.

The sinking dollar could play a role in determining the Fed’s next move. The euro soared to a record $1.427 on Friday from $1.416 on Thursday and up from $1.32 at the start of the year.

“Everybody has jumped on the anti-dollar bandwagon,” said Samarjit Shankar, director of global currency strategy at Bank of New York Mellon in Boston.

If the dollar spirals lower, it could put pressure on the Fed to support the currency by holding the line on interest rates, analysts note.

As the dollar sinks, it’s making gold more attractive as an investment. Near-term gold futures zoomed Friday to their highest level since January 1980, rising $10.10 to $742.80 an ounce. The price is up $107.60 an ounce, or 17%, year to date.

In other commodity trading, crude oil futures pulled back Friday, dropping $1.22 to $81.66 a barrel in New York. The all-time high was $83.32 on Sept. 20.