NEW YORK (CNN/Money) -
The Nasdaq surged Friday, and for the week, as investors scooped up beaten down technology shares, and cheered a drop in oil prices.
The Dow and S&P saw smaller gains, hampered Friday by a profit warning from Alcoa -- which sank nearly 8 percent -- and from a shift from some of the more stodgy, blue-chip issues into technology.
But a late drop in crude oil prices helped temper the negatives.
The Nasdaq composite (up 24.66 to 1,894.31, Charts) jumped 1.3 percent in Friday's action, while the Dow Jones industrial average (up 23.97 to 10,313.07, Charts) rose about 0.2 percent.
The Standard & Poor's 500 (up 5.54 to 1,123.92, Charts) index gained 0.5 percent.
Leading Friday's advance was technology, for the second consecutive session. Once again, semiconductors led the charge, rallying after several down weeks.
The Philadelphia Semiconductor (up 12.63 to 383.61, Charts) index, or the SOX, added 3.4 percent Friday
All three indexes gained on the week, with the Nasdaq the most buoyant.
The Dow and the S&P 500 gained for the fifth week in a row, posting gains of 0.5 percent and 0.9 percent, respectively. The Nasdaq gained 2.7 percent after falling last week.
"The market had gotten oversold and so you've got this tech rally at the end of the week," said Peter Brodie, senior vice president and director of investments at Bryn Mawr Trust Wealth Management.
"But after this run, we would not be surprised to see a pullback next week," he added.
Next week the news flow picks up the pace.
Reports are due on retail sales, consumer prices, manufacturing, factory production and capacity use. OPEC meets Wednesday and the University of Michigan's consumer sentiment report is due Friday. Earnings reports are due from Oracle, and a number of retailers, including Best Buy.
Longer term, he expects the market to pick up steam, gaining in the fourth quarter, and ultimately rising between eight percent and ten percent for the year 2004. But shorter term, many of the same concerns remain, and are likely to keep stocks rangebound, including the price of oil, the recent signs of a slowdown in the economy and the rising interest rate environment.
Friday's market
The tech movement was partly driven by portfolio managers and other market professionals returning from summer vacations and needing to adjust portfolios.
Adding to the tech enthusiasm was a major development for the software sector. A federal judge threw out the government's request to block Oracle's attempted hostile takeover of rival PeopleSoft, saying U.S. antitrust authorities had not proven their case.
Shares of Oracle (ORCL: up $0.53 to $10.46, Research, Estimates) rose on the positive verdict, while PeopleSoft (PSFT: up $1.84 to $19.79, Research, Estimates) gained on analyst speculation that now Oracle will need to raise its offer price.
Other business software makers gained, too, including Siebel Systems (SEBL: up $0.63 to $8.17, Research, Estimates) and BEA Systems (BEAS: up $0.54 to $7.08, Research, Estimates), both up more than 8 percent.
Also supporting gains: morning reports showing a surprise slide in wholesale inflation and a decline in the trade gap, as well as a slide in oil prices.
Oil reverses course
Crude oil prices rose more than 4 percent Thursday on supply concerns, and gave back almost the entire amount in Friday's session as traders bailed out of the commodity.
Reasons cited for the pullback included profit taking after the previous session's run, caution ahead of the September 11 anniversary and speculation that Hurricane Ivan won't be as devastating as had been previously thought, which reduced crude supply disruption fears.
After a one-hour delay to commemorate the events of Sept. 11, 2001, trading began at the New York Mercantile Exchange. Light crude oil for October delivery lost $1.80 to settle at $42.81 a barrel.
Although less influential than in early summer, fluctuations in the oil market continue to sway stocks.
Alcoa warns, tumbles
Keeping the Dow from participating more fully in the rally was component Alcoa (AA: down $2.47 to $30.75, Research, Estimates). With the quarter nearing its end, earnings warnings have been trickling in and Alcoa became the latest high-profile company to do just that.
The aluminum producer warned late Thursday that third-quarter results will miss expectations due to a variety of problems, including plant shutdowns, a fire and a strike. Earnings are now forecast to be in the range of 30 to 35 cents, versus analysts' expectations for earnings of 50 cents.
Alcoa shares fell 7.6 percent.
Also joining the warnings parade was auto parts supplier Visteon (VC: down $1.00 to $8.00, Research, Estimates), which fell more than 11 percent after saying earnings in the second half will miss expectations.
In addition to Alcoa, the Dow's other big drag was Pfizer (PFE: down $0.58 to $31.86, Research, Estimates), which fell 1.8 percent on talk that it may have pulled out of the Bear Stearns Healthcare conference next week, Reuters reported, sparking worries about its earnings.
In other corporate news, Walt Disney (DIS: up $0.30 to $23.16, Research, Estimates) shares inched higher after the company said Michael Eisner, its embattled CEO, will leave the company in 2006.
Market breadth was positive. On the New York Stock Exchange, winners beat losers by more than nine to seven as 1.25 billion shares changed hands. On the Nasdaq, advancers topped decliners three to two on volume of 1.61 billion shares.
Inflation tame
The morning's economic news was mostly supportive to stocks.
The producer price index, which measures wholesale inflation, fell 0.1 percent in August, versus expectations of a rise of 0.2 percent. PPI rose 0.1 percent in July.
The so-called core PPI, which excludes food and energy, also fell 0.1 percent after rising 0.1 percent in July. Analysts thought it would rise 0.1 percent.
Meanwhile, a separate report showed the trade gap narrowed more than expected, although it was still the second highest on record.
Tech stocks had rallied Thursday as investors cheered Nokia's bullish earnings forecast and National Semiconductor's improved earnings. Meanwhile, blue chips languished as oil prices surged.
A number of Fed officials spoke Friday, covering a variety of topics. Among the speakers, Cleveland Fed President Sandra Pianalto stressed the need for interest rates to rise to a more neutral level, even as inflation pressure has dissipated.
The central bank is expected to boost short-term interest rates at its next meeting, on Sept. 21.
Treasury prices barely gained, giving back most of their earlier advance. The 10-year note yield fell to 4.18 percent from 4.19 percent late Thursday. Treasury prices and yields move in opposite directions.
In currency trading, the dollar declined versus the yen and euro.
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