Stock prices were mixed again Friday. Investors continued to worry about technology shares and rising interest rates.
The Dow Jones industrial average fell 2.40 points to 12,565.53. However, the Nasdaq composite index gained 8.10 points to 2,451.31.
Despite the gain, the Nasdaq was down 2.1 percent for the week, while the Dow was able to eke out a gain of 0.1 percent.
Investors were surprised by a report from the University of Michigan that showed a surge in consumer confidence in the first two weeks of January. Households were encouraged by lower gasoline prices and a strong job market.
Shares of International Business Machines Corp. (NYSE: IBM) weighed on the Dow. As was the case with Apple (Nasdaq: AAPL) on Thursday, IBM reported solid gains in the past quarter but was guarded on future growth.
Profit concerns have unnerved investors already made skittish by the recent tug-of-war over whether stocks will move higher in 2007 with the same resolve as in 2006. Recent weakness in technology stocks had upset Wall Street; tech stocks regained some ground a day after the Nasdaq composite index posted its biggest drop since late November but were still down for the week.
"I think we're at an extremely pivotal psychological level," said T.J. Marta, economic strategist at RBC Capital Markets. He said earnings and economic data support the Federal Reserve's notion that the economy can pull off a soft landing. Marta contends Wall Street is now mulling whether the economy will do a "fly-by" and skip a soft landing entirely with growth continuing apace.
The Fed is unlikely to lower short-term interest rates if the economy continues at a steady clip or if it begins to accelerate again. The central bank has left interest rates unchanged at its last four meetings after a string of 17 straight increases that began in 2004. Last year, investors propelled stocks sharply higher partly on the widely held view that the Fed would cut rates perhaps as early as the first half of 2007.
Oil settled up $1.51 at $51.99 a barrel on the New York Mercantile Exchange. The increase follows sharp declines in recent sessions and could signal that investors are eager to buy oil to cover previous commitments as they head into the weekend. The move helped energy companies like Exxon Mobile Corp. (NYSE: XOM), which rose $1.57, or 2.2 percent, to $73.53.
Since the start of 2007, investors have been casting about looking for reasons why the sharp gains stocks enjoyed last year might continue. In 2006, double-digit earnings growth helped propel stocks higher. While many recent fourth-quarter earnings reports have been solid, some forecasts have prompted Wall Street to adopt a more cautious tone. The tepid gains in stocks this year signal investors' concerns about interest rates and the Fed's next move as well as whether profit growth will remain sufficient to push stocks upward.
IBM fell $3.28, or 3.3 percent, to $96.17 after the company's better-than-expected fourth-quarter profit met with little enthusiasm from investors. Part of the profit increase was due to changes to the company's tax rates. The company's forecast was near the lower end of its growth target of 10 percent to 12 percent.
Alcoa Inc. (NYSE: AA) helped offset some of the weakness in the Dow industrials caused by IBM. Alcoa rose $1.10, or 3.6 percent, to $31.40 after the world's largest aluminum maker said it would repurchase up to 10 percent of its outstanding shares and increased its annual dividend rate to 68 cents from 60 cents.
Abbott Laboratories (NYSE: ABT) closed up 73 cents at $53.52, passing a previous 52-week high of $52.92, after striking a deal to sell a portion of its medical testing business to GE for $8.13 billion.
Citigroup Inc. (NYSE: C), the nation's No. 1 bank, rose 11 cents to $54.50 after posting a 26 percent drop in its fourth-quarter profit. The stock has risen in the last month as the company pledged to bring down costs, but spending concerns resurfaced Friday.
Motorola Inc. (NYSE: MOT), which warned in early January that discounts on mobile phones would cut into fourth-quarter profits, posted lower earnings that were nonetheless better than the forecast indicated. The stock advanced 56 cents, or 3 percent, to $19.27 after it announced plans to cut 3,500 jobs, or about 5 percent of its work force, to reign in costs.
Morgan Stanley (NYSE: MS) rose 29 cents to $81.50 after its real estate arm agreed to acquire CNL Hotel & Resorts Inc., the nation's No. 2 hotel real-estate investment trust, for $3.13 billion.
The Russell 2000 index of smaller companies rose 6.95, or 0.89 percent, to 785.16.
Overseas, Japan's Nikkei stock closed down 0.35 percent. Britain's FTSE 100 closed up 0.43 percent, Germany's DAX index finished up 0.86 percent, and France's CAC-40 up 1.07 percent.
The Associated Press contributed to this report.
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