NEW YORK (CNN/Money) -
The Nasdaq rose and the Dow and S&P 500 tumbled Friday, at the end of a choppy week in which investors were distracted by concerns about next week's big three: the Fed policy-setting meeting, the handover in Iraq and the June payrolls report.
The Nasdaq composite (up 9.90 to 2,025.47, Charts) gained around 0.5 percent, retreating from earlier highs.
The Dow Jones industrial average (down 71.97 to 10,371.84, Charts) lost 0.7 percent and the Standard & Poor's 500 (down 6.22 to 1,134.43, Charts) index lost 0.55 percent.
The market swayed back and forth over the unchanged line throughout the session as investors digested the morning's gross domestic product growth, consumer sentiment and housing numbers. A tech rally took hold in the afternoon, lifting the overall market, but soon retreated, leaving just the Nasdaq higher by the close.
For the week, the Nasdaq gained 1.9 percent, thanks to several sessions of rallies. The S&P 500 ended the week virtually unchanged, down by just 0.05 percent, and the Dow lost 0.4 percent for the five-day period.
The week was choppy, with little in the way of earnings -- and no economic news until Thursday. As a result, investors were particularly focused on the potentially market-moving events due next week.
The Fed holds its policy-setting meeting June 29-30, the transfer of power in Iraq from a temporary council to a transitional government is expected to happen June 30, and the June payrolls report is due July 2.
Ram Kolluri, GlobalValue Investors' chief investment officer says he thinks the market is holding up pretty well given all these uncertainties. "Considering the carnage that is going on in Iraq and the fact that the Fed is set to raise rates next week, we should be at the lower end of this trading range, but we're not."
Kolluri said that the market has been able to stick at the higher end of the range because it has factored in the expected rate hikes this year and seems to have come to terms with the events in Iraq. In addition, he says that there is optimism about the second-quarter earnings.
Markets have traded in a range since about February of this year, with investors stalling a bit after 2003's big runup.
"I think the market is going to be in a position to rally going into the events of next week," said Kevin Caron, market strategist at Ryan, Beck & Co.
Monday brings reports on personal spending and income before the start of trading.
Personal income is expected to have risen 0.5 percent in May, according to a consensus of economists surveyed by Briefing.com, after rising 0.6 percent in April. Personal spending is expected to have risen 0.8 percent in May, after rising 0.3 percent in April.
Longer term, Caron sees the market having the potential for a slight summer rally, also due to the start of second-quarter earnings the week of July 5. The general consensus of analysts surveyed by First Call is for earnings in the second-quarter to rise at least 20 percent from the same quarter a year earlier. Caron thinks the actual rise in earnings will likely end up being closer to 25 percent or even 30 percent.
Economic data offer mixed picture
Released before the open, a government report showed that gross domestic product (GDP) in the first quarter actually grew at a 3.9 percent annual rate, versus an initial read of 4.4 percent. Economists surveyed by Briefing.com expected GDP would show no change from the preliminary read. GDP grew at a 4.1 percent annual rate in the fourth quarter of 2003.
The slower growth of the economy would seem to confirm that the Federal Reserve can indeed raise interest rates at a measured pace, a comforting prospect for investors.
However, the core price index component of the report showed a rise to 2.0 from 1.7 last month, implying inflation is on the rise.
Unclear whether to focus on slower growth or higher inflation, stock investors initially took a muted response to the report.
But market sentiment turned positive as investors decided to focus on the positive implications for interest rates implied by the slower growth.
Investors seemed to take in stride the morning's other economic news.
The University of Michigan's consumer sentiment index came in at 95.6 in its final reading for June, against May's final reading of 90.2. And existing home sales surged by 2.6 percent in May to a seasonally adjusted annual rate of 6.8 million, according to the National Association of Realtors, above April's level of 6.63 million.
On the move
The Nasdaq managed to stay in positive territory, reflecting gains in some of its more heavily-weighted shares, such as Oracle (ORCL: up $0.30 to $11.80, Research, Estimates) and Sun Microsystems (SUNW: up $0.13 to $4.41, Research, Estimates).
A variety of telecom and networking stocks bounced for the second session in a row, including Ciena (CIEN: up $0.27 to $3.76, Research, Estimates) and JDS Uniphase (JDSU: up $0.13 to $3.82, Research, Estimates).
Among other gainers, Nike (NKE: up $2.91 to $75.31, Research, Estimates) gained more than 4 percent after the company posted earnings late Thursday that grew from a year earlier and surpassed analysts' expectations.
Among the blue chip decliners weighing on the Dow, General Electric (GE: down $1.09 to $32.18, Research, Estimates) lost 3.3 percent and Exxon Mobil (XOM: down $1.02 to $44.25, Research, Estimates) lost 2.2 percent.
Dow drug components Merck (MRK: down $0.91 to $47.00, Research, Estimates) and Johnson & Johnson (JNJ: down $1.19 to $54.50, Research, Estimates) also tumbled, along with the rest of the pharmaceutical sector.
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Dow component Pfizer (PFE: down $0.99 to $33.82, Research, Estimates) lost 2.8 percent. Late Thursday, research was released showing that an Alzheimer's drug the company co-markets with a Japanese firm has shown little worthwhile benefit in a five-year patient study. Separately, Pfizer said Friday that it is buying the rights it doesn't yet own to a colorectal cancer drug from French drugmaker Sanofi-Synthelabo for about $620 million.
Eli Lilly (LLY: down $1.33 to $71.40, Research, Estimates) lost 1.8 percent after the Food and Drug Administration opted to delay the action date to approve its new anti-depressant drug Cymbalta by three months.
Among other decliners, shares of Titan (TTN: down $3.71 to $14.53, Research, Estimates) tumbled more than 20 percent in active New York Stock Exchange trade on worries that its deal to be acquired by Lockheed-Martin will fall through due to Titan being investigated for bribery charges.
Market breadth was positive and volume was stronger than it has been in some time. On the New York Stock Exchange, where 1.74 billion shares changed hands, decliners beat advancers nine to seven. On the Nasdaq, winners beat losers by more than four to three, as 1.95 billion shares changed hands.
Treasury prices closed just above unchanged, with the 10-year note yield at 4.64 percent. Treasury prices and yields move in opposite directions. The dollar rose versus the euro and yen.
NYMEX light sweet crude oil futures fell 38 cents to settle at $37.55 per barrel, after the Norwegian government demanded oil workers end their strike. COMEX gold fell 30 cents to settle at $403.20 an ounce.