NEW YORK (CNNmoney) - The Dow Jones industrial average edged higher Thursday, posting its second-best finish since Sept. 11 after a drop in global interest rates drew money into blue chip stocks.
But the Nasdaq composite index dipped lower for the first time this week as technology investors paused following a seven-week advance.
"It's been a great ... run," said Ned Riley, chief investment strategist at State Street Global Advisors. "The market needs a rest."
Stocks rallied for much of the day after the European Central Bank cut borrowing costs by a surprisingly large half-percentage point, joining its U.S. counterpart - the Federal Reserve - in a move to encourage consumers and businesses to spend.
Lower rates have also dimmed the luster of fixed-income securities, which investors bought during the stock market's 18-month selloff.
Stocks have been a good bet since Sept. 21; all the major indexes have posted double-digit percentage gains since then. In contrast, the government's highest-yielding security, the 30-year bond, returns less than 5 percent.
Thursday's mixed action comes ahead of economic data Friday on consumer confidence and producer prices. It also followed the release of Fed's October meeting minutes, which showed unanimous support for a half-point rate cut that month.
But in explaining the market's lackluster finish, analysts cited the recent advance.
"Based on how far we've come, we have to be prepared for some pullback along the way," Marty Cunningham, trader at Schwab Capital Management, told CNNfn's Street Sweep.
Investors got some good news Thursday from the government, which said first-time jobless claims fell sharply last week. And a number of retailers, mostly discounters, said that October sales rose despite the effects of the terrorist attack.
The Dow industrials added 33.15 points to 9,587.52, after spending much of the session above its 9,605.51 close reached the day before hijacked planes destroyed the World Trade Center and part of the Pentagon.
The Nasdaq composite index shed 9.76 to 1,827.77, near its late-August highs, while the Standard & Poor's 500 tacked on 2.74 to close at 1,118.54.
More stocks rose than fell. On the New York Stock Exchange, advancing stocks topped declining ones by a 8-to-7 margin as 1.4 billion shares traded. Nasdaq winners beat losers nearly 9-to-8 as 2.2 billion stocks traded.
In other markets, Treasury securities fell. The dollar rose against the euro and fell versus the yen.
Global interest
The session's focus was overseas, where the European Central Bank and the Bank of England both cut interest rates by half a percentage point, two days after the Fed lowered borrowing costs for the tenth time this year.
The ECB has now cut borrowing costs four times in 2001, a 1-1/2 percentage point drop.
That move was cheered by market watchers concerned that European central bankers have not done enough to spur growth.
"We have a global decrease in interest rates and a global decrease in inflation," Michael Holland, CEO of Holland & Co., told CNNfn's Market Call.
The labor market stabilized last week, with the government saying the number of Americans filing for first-time jobless claims fell by 46,000 to 450,000.
"Claims fell because the initial wave of job losses after Sept. 11th is fading," said Ian Shepherdson, chief U.S. economist at High Frequency Economics.
Still, continuing unemployment claims edged up again, to 3.72 million, consistent with other data showing joblessness at a five-year high. Mickey Levy, economist at Bank of America Securities, expects the unemployment rate to rise to 6 percent from 5.4 percent in October.
Discounters' delight
Wal-Mart Stores (WMT: up $0.68 to $54.50, Research, Estimates) said sales at stores open at least a year jumped 6.7 percent last month. Fellow Dow component Home Depot (HD: down $0.06 to $41.89, Research, Estimates) also rose.
Costco (COST: up $1.29 to $42.66, Research, Estimates), the warehouse club operator, saw its same-store sales gain 6 percent, while rival BJ's Wholesale Club (BJ: down $3.45 to $49.14, Research, Estimates) reported a 1.9 percent rise.
Pier 1 Imports (PIR: up $0.74 to $12.82, Research, Estimates), the home furnishings retailer, raised its third-quarter profit forecast as sales in October at stores open at least a year rose 4 percent.
But other retailers appeared to suffer from the spending slowdown following the Sept. 11 attacks. Shares of Barnes & Noble (BKS: down $13.60 to $24.48, Research, Estimates) fell 20 percent after the bookseller warned its full-year forecast will fall short of expectations.
Both Kmart (KM: down $0.14 to $6.61, Research, Estimates) and J.C. Penney (JCP: down $0.10 to $23.35, Research, Estimates) saw declining sales.
The losses continued for Enron (ENE: down $0.64 to $8.41, Research, Estimates) after the energy trader restated its earnings for 1997 through the third quarter of 2001, slashing millions of dollars from most reporting periods.
The stock market has had a good run since Sept. 21, the first week of trading following the terrorist attacks. The Nasdaq is up more than 28 percent since then, while the Dow industrials have gained 16.4 percent. 
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