Dow ekes out new all-time high

NEW YORK (CNNMoney.com) -- Stocks struggled Friday, losing momentum ahead of the long holiday weekend, after a three-session advance. Nonetheless, the Dow Jones industrial average managed to claw its way to a fresh record high.

The Dow (up 2.56 to 12,767.57, Charts) managed to close a few points higher, ending at a fresh all-time high for the second session in a row.

The broader S&P 500 (down 1.27 to 1,455.54, Charts) index ended just below unchanged after ending the previous session at a 6-1/2 year high.

The tech-fueled Nasdaq (down 0.79 to 2,496.31, Charts) composite also ended near unchanged.

The major gauges rose for three straight sessions this week as investors digested mixed economic news and Federal Reserve Chairman Ben Bernanke's congressional testimony on the economy.

But after that run, stocks were vulnerable Friday, particularly ahead of a three-day holiday weekend.

All financial markets are closed Monday in observance of Presidents' Day.

All three major gauges were lower through the early afternoon Friday, due to a steep drop in housing starts, a rise in oil prices and some cautious comments from Microsoft's CEO.

The selling let up a bit by the close, but trading volume was relatively light, as a number of Wall Street professionals bailed out early ahead of the weekend.

"We're pulling back simply because we've had a few good days and now we're ahead of the long weekend," said Peter Cardillo, chief market economist at Avalon Partners. "Friday's a getaway day for a lot of people."

Nonetheless, gains for the week were strong, with the Dow up about 1.5 percent, the S&P 500 up around 1.2 percent and the Nasdaq higher by about 1.5 percent.

Among stock movers, Microsoft (down $0.72 to $28.74, Charts) fell 2.4 percent after the software leader's CEO said late Thursday that some analysts' forecasts for Vista revenue in fiscal-year 2008 are too aggressive. He also said that operating expenses should wane.

The session also brought its share of merger news and rumors.

AMR (up $0.92 to $38.97, Charts) shares gained on media reports that the parent of American Airlines may be a buyout target for a group that includes Goldman Sachs and British Airways. But analysts questioned the likelihood of the deal said it was unlikely.

Shares of DaimlerChrysler (up $3.08 to $73.33, Charts) rose 4.4 percent on reports that General Motors (down $0.10 to $36.34, Charts) is in talks to buy the company's Chrysler unit.

Separately, GM said it is nearly done with the accounting review that caused it to restate its financial results going back to 2002.

Compass Bancshares (up $4.33 to $70.70, Charts) rose 6.5 percent after Spain's second largest bank offered to buy the U.S. regional bank for $9.6 billion, a more than 16 percent premium over its Thursday closing price.

Fieldstone Investment (up $2.38 to $4.98, Charts) shares almost doubled after the mortgage lender agreed to be bought by Radian Group (down $0.09 to $62.72, Charts) and a unit of MGIC Investment (down $0.38 to $65.59, Charts) for about $260 million, a more than 100 percent premium to Fieldstone's closing price Thursday.

Market breadth was positive and volume was moderate. On the New York Stock Exchange, winners narrowly edged out losers on volume of almost 1.36 billion shares. On the Nasdaq, advancers beat decliners by more than eight to seven on volume of 1.92 billion shares.

Friday brought a mix of economic reports.

Housing starts plunged in January to the slowest pace since 1997, throwing doubts on bets that the struggling housing market is stabilizing. Building permits, a measure of builders' confidence, also fell to a slower-than-expected pace.

Another report showed that the Producer Price Index (PPI), which measures prices at the wholesale level, fell a larger-than-expected 0.6 percent in January. The so-called Core PPI, which excludes volatile food and energy prices, rose 0.2 percent, as expected.

Finally, the University of Michigan Consumer Sentiment index dipped to 93.3 in February from 96.9 last month, below forecasts for a drop to 96.5.

"The housing news was on the negative side, but we also had some favorable inflation news, so the economic reports are kind of canceling each other out," Cardillo added.

U.S. light crude oil for March delivery rose $1.40 to settle at $59.39 a barrel on the New York Mercantile Exchange.

COMEX gold for April delivery rose $1.40 to settle at $672.80 an ounce.

Treasury prices crept higher, lowering the yield on the benchmark 10-year note to 4.69 percent from 4.70 percent late Thursday. Treasury prices and yields move in opposite directions.

In currency trading, the dollar gained modestly versus the euro and the yen.

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