NEW YORK (CNNfn) - The Nasdaq composite index rose Friday as investors renewed their love affair with technology stocks only one day after the tech-heavy gauge slipped into what Wall Street deems a correction.|
But the Dow Jones industrial average edged lower, as money fled its "old economy" stocks that just a session earlier powered the index to a record point gain.
"I still prefer technology stocks," Courtney Smith, president and chief investment officer at Courtney Smith & Co., told CNN's Street Sweep. "The tech sector is still the place were the earnings momentum is."
Investors agreed, as money chased Intel, Cisco and Microsoft. At the same time, traders dumped Alcoa, General Motors and Procter & Gamble, all stocks that helped propel the Dow nearly 500 points ahead Thursday.
The Nasdaq composite index rose 80.74 points, or 1.7 percent, to 4,798.13. The strength comes a day after the tech-heavy index slipped 10 percent from its record high -- the point Wall Street considers a correction -- before staging a dramatic afternoon rebound.
The Dow, meanwhile, shed 35.37 points to 10,595.23. Still, the blue chips' gain of more than 800 points on Wednesday and Thursday helped the index notch a 6.7 percent gain this week.
The Nasdaq, meanwhile, shed 4.96 percent this week. But it still has sharply outperformed the Dow this year.
Courtney Smith sees that trend continuing, as investors buy the technology stocks expected to lead the economy's growth. And he does not forecast the Dow gaining appreciably until the Federal Reserve finishes raising interest rates.
The Fed, the nation's central bank, meets Tuesday. Analysts widely expect Fed policy makers to tighten credit by a quarter percentage point -- the fifth increase since June -- bringing the government's main lending rate to 6 percent. Many see another rate hike again in May.
Still, Thomas Galvin, chief investment officer at Donaldson Lufkin & Jenrette, told CNNfn's Market Coverage that the Fed has a good handle on controlling inflation, creating a good environment stocks. (253K WAV) (253K AIFF)
In the broader market Friday, the S&P 500 rose 6 to 1,464.47.
Market breadth was mixed. Declining issues on the New York Stock Exchange beat advancers 1,581 to 1,411, as trading volume topped 1.2 billion shares. But Nasdaq winners beat losers 2,228 to 2,017. More than 1.6 billion shares changed hands.
In other markets, the dollar gained against the yen but was little changed against the euro. Treasury securities rose.
Nasdaq resumes lead
Powering the Nasdaq, Cisco Systems (CSCO: Research, Estimates) gained 3-11/12 to 135, and Sun Microsystems (SUNW: Research, Estimates) jumped 5-3/8 to 96-1/8.
Qualcomm (QCOM: Research, Estimates) rose 3-3/8 to 136-1/4. The wireless services provider said Friday it is offering $8.9 million to settle a class action lawsuit brought against it by former employees.
But manufacturers and consumer products makers fell, hurting the Dow.
Alcoa (AA: Research, Estimates) skidded 4-1/4 to 64-11/16, General Motors (GM: Research, Estimates) shed 3-5/8 to 80-1/8, and Procter & Gamble (PG: Research, Estimates) dropped 2-1/4 to 57-5/8.
Still, Larry Jones, senior portfolio manager at the Kenwood Group, said the run in value stocks should resume as investors recognize that tremendous bargains exist.
"We think what we are seeing is a preview of what's to come," Jones told CNNfn's market coverage, referring to Thursday's Dow rally. "There's a whole sector of the market place that's been ignored."
It was ignored again Friday, as investors focused on technology.
Intel (INTC: Research, Estimates) jumped 4-13/16 to 129-7/8 and Microsoft (MSFT: Research, Estimates) rose 4 to 99-3/8.
Hewlett-Packard (HWP: Research, Estimates) was the Dow's biggest gainer. The computer maker surged 5 to close at 138.
Boeing (BA: Research, Estimates) also helped the Dow. The aircraft maker jumped 1-9/16 to 37-3/16 after saying it reached a tentative contract with the union representing thousands of engineers who have been on strike for 38 days.
Traders expected volatility throughout the session because of Friday's expiration of options, index options and futures contracts, known as a "triple witching."
While the session wasn't volatile, the week certainly was. On Monday, the Nasdaq suffered its fourth-biggest point drop. On Tuesday the Nasdaq registered the second-largest plunge on record. Then came the Dow, which set its fourth biggest point gain on Wednesday, followed by a record jump Thursday.
"This is probably the most unusual week we've had in the stock market, at least since 1929," Jim Melcher, president of Balestra Capital, told CNNfn's Capital Ideas.
CPI edges up
Friday's market action followed news before the start of trading that inflation at retail level, excluding food and energy costs, advanced at a moderate pace last month.
The Consumer Price Index, a closely watched inflation yardstick, gained 0.5 percent in February, the government said, slightly above the 0.4 percent increase economists polled by Briefing.com expected. Excluding volatile food and energy costs, prices rose just 0.2 percent.
Though it presents a tame picture of rising inflation, analysts said the report should do nothing to dissuade the Fed from raising interest rate by a quarter percentage point Tuesday.
Thomas Galvin, chief investment officer at Donaldson Lufkin & Jenrette, told CNNfn's Market Coverage that the equity markets aren't rattled by the threat of future interest rate increases. (253K WAV) (253K AIFF)
Vince Farrell, chairman and chief investment officer of Spears, Benzak, Salomon & Farrell, told CNN's In the Money that financial stocks might be the key to determining whether the current rally continues. (386K WAV) (386K AIFF)