NEW YORK (CNN/Money) - By the smallest of margins, the Dow Jones industrial average erased the last of its post-Sept. 11 loss Friday, vindicating investors who watched the blue chips tumble more than 1,300 points after terrorists attacked the United States.
With its gain, the Dow joins the Nasdaq composite index, which recouped its post-attack losses last month amid hopes for an economic turnaround next year.
At 9,608.00, the Dow stands less than 3 points above its 9,605.51 close on Sept. 10. But the comeback is a stunning one for an index that seven weeks ago fell to a three-year low.
Friday capped another winning week on Wall Street despite some discouraging economic news.
"I think the only problem in the market is you've got a hell of a good run here and you're going to see people take profits," said Mike Murphy, head of equity trading at First Union Securities.
Still, with interest rates low, Murphy expects the stock market's gains to continue in the months ahead.
"Where are you going to put your money?" he asked. "There's a much greater risk being short than long."
That's been the case this week, with stocks gaining after interest rate cuts in the United States and Europe sparked optimism for an economic recovery. But oil prices rose for a second day Friday, a trend that could raise costs for businesses and consumers.
Walt Disney and Heinz cut their profit outlooks, serving up more signs that companies are suffering amid the economy's worst contraction in a decade.
And wholesale prices tumbled last month, a government report showed. The decline will make it easier for the Federal Reserve to keep cutting interest rates but tougher for some companies to grow profits.
Still, the Dow industrials rose 20.48 points to 9,608.00, rising 3 percent over the last five sessions. Also up 3 percent on the week, the Standard & Poor's 500 added 1.77 to 1,120.31.
When it comes to the Dow's run since Sept. 10, credit IBM and Wal-Mart. The world's biggest retailer is up 19 percent in the period while IBM, has gained 18.2 percent.
The Nasdaq rose 0.71 to 1,828.48 Friday, gaining to 4.7 percent on the week.
On the New York Stock Exchange, advancing stocks beat declining ones by an 8-to-7 margin as 1 billion shares traded. Nasdaq losers topped winners 9-to-8 as 1.5 billion shares traded.
In other markets, Treasury securities edged lower. The dollar rose against the yen and declined versus the euro.
More warnings
Walt Disney (DIS: up $0.11 to $18.95, Research, Estimates), the media and entertainment company, posted a fiscal fourth-quarter profit that fell short of forecasts. Looking ahead, Disney warned that the current quarter and year will be even more difficult as advertising and theme park attendance slow.
Similarly, Heinz (HNZ: down $2.80 to $39.90, Research, Estimates), the maker of ketchup, Star-Kist tuna and Skippy peanut butter, said its fiscal second-quarter and full-year earnings will fall short of estimates.
And General Mills (GIS: down $0.86 to $48.75, Research, Estimates) warned that income before one-time items would be below analysts' estimates in the second quarter and all of fiscal 2002.
The losses continued for Barnes & Noble (BKS: down $0.48 to $24.00, Research, Estimates), one day after the bookseller warned its full-year forecast will fall short of expectations.
A big drop in energy prices, meanwhile, caused the government's Producer Price Index to tumble 1.6 percent last month, the steepest decline on record. Excluding energy and food, the PPI dropped 0.5 percent.
Falling prices allow the Federal Reserve, which this week lowered rates for the tenth time this year, to keep the cuts coming with little fear of stoking inflation. But it also puts pressure on profit margins as companies cut prices to sell goods.
The PPI report "shows you how weak the economy is," Robert Brusca, economist at Ecobest Consulting, told CNNfn's Before Hours.
In a bright spot, consumer confidence, according to one survey, posted a surprise gain in November, a month when the Dow industrials closed lower only once. The University of Michigan said its index of consumer sentiment rose to 83.5 in a preliminary November reading from 82.7 in October.
The figure surprised economists who were looking for a decline; while Americans have been refinancing mortgages at a record pace to lock in lower borrowing costs, the unemployment rate stands at a five-year high and employers last month eliminated more than 400,000 jobs.
To help prime the economy's pump, a Senate committee approved a $67 billion Democratic-backed economic stimulus plan.
A strong autumn
The Dow's milestone masks the better performance for tech stocks. The Nasdaq stands near its highest levels since last August and is up 28 percent since Sept. 21, the first week after markets opened following the attacks.
But it's been another tough year. The Nasdaq is off 26 percent in 2001, while the Dow is down 11 percent.
Explaining the market's modest advance Friday, analysts cited Wall Street's seven-week run, which may have come too far, too fast. "The market deservedly is taking a breather," said Alan Ackerman, investment strategist at Fahnestock & Co.
Ackerman also blamed the price of oil, which has been rising this week He's been buying energy stocks. Light sweet crude rose $1.04 to $22.22 a barrel in New York.
The gains lifted oil stocks, with Exxon Mobil (XOM: up $0.75 to $40.25, Research, Estimates) among the Dow's biggest gainers.
Investors also played defense Friday, buying stocks that often hold up well in a slowing economy. Johnson & Johnson (JNJ: up $0.56 to $59.56, Research, Estimates) and Philip Morris (MO: up $0.51 to $46.83, Research, Estimates) all rose.
In other gainers, Nvidia (NVDA: up $3.45 to $53.20, Research, Estimates), a maker of microchips, reported earnings of 28 cents a share, 5 cents above expectations. The company also upped its financial guidance for the next two quarters.
Palm (PALM: up $0.38 to $2.65, Research, Estimates) rallied. The maker of handheld computers said Chief Executive Carl Yankowski resigned. Palm shares have declined more than 95 percent over the last 12 months. 
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