NEW YORK (CNN/Money) -
Blue-chip stocks fell Friday while tech stocks ended little changed at the end of a positive week that saw the major indexes chalk up their first gainful year in four.
The Dow Jones industrial average (down 44.07 to 10409.85, Charts) lost 0.4 percent, the Standard & Poor's 500 (down 3.44 to 1108.48, Charts) index lost 0.3 percent, while the Nasdaq composite (up 3.31 to 2006.68, Charts) gained 0.2 percent.
All three had traded higher in the morning and early afternoon following the release of the Institute for Supply Management's manufacturing index for December, which rose sharply.
Traders said the very light volume after Thursday's New Year's Day holiday and a mild bout of profit taking likely caused the late session decline.
"Despite the decline, the ISM report was very positive, and what you can take away from it is that the economy is continuing to expand," said John Davidson, president and CEO at PartnersRe Asset Management. "The question for 2004 is whether that continued expansion has already been reflected in the 25 percent returns you saw in stocks last year."
For the week, all three major indexes posted gains. The Dow added 0.8 percent, the S&P 500 added 1.1 percent and the Nasdaq composite added 1.7 percent.
Next week brings a number of economic reports and the start of the period of reporting fourth-quarter earnings. Among the notables: Alcoa (AA: down $0.45 to $37.55, Research, Estimates) reports results after the close Thursday.
The week's most market-moving economic reports are likely Wednesday's Institute for Supply Management report on the services sector of the economy and Friday's December unemployment report, Davidson said.
Monday brings December auto and truck sales during the session and the November construction spending report shortly after the open.
A strong 2003
After three years of declines that surrounded the bursting of the tech bubble, the terrorist attacks of September 11, the first contested election in a century and a recession, stocks managed a major turnaround in 2003. For the year, the Dow gained more than 25 percent, the S&P 500 gained more than 26 percent and the Nasdaq rallied more than 50 percent.
Optimism about a corporate and economic profit recovery spurred the gains. While the same factors will likely be in place in early 2004, stock gains may not be as substantial after 2003's runup, some analysts speculate.
"Most analysts are calling for the market to rise between 5 percent and 10 percent next year, but I think it could be more like 15 percent," said Michael Carty, principal at New Millennium Advisors. "The economy is heating up, the employment picture has been improving and companies will begin spending more."
Among the early positive reports, a survey of 54 economists by the Wall Street Journal showed they expect the unemployment rate in the United States to slip to 5.5 percent by November, which could yield around 1.5 million new jobs in a 12-month period.
Additionally, the Institute for Supply Management's manufacturing index for December showed an unexpected surge to 66.2, while economists had expected a slip to 61.0 from 62.8 in November.
The news helped support stock gains and pressured bonds as it confirmed that a robust economic recovery is still underway. The benchmark 10-year Treasury note plunged 26/32 of a point in price, its yield jumping to 4.35 percent from 4.25 percent late Wednesday. The bond market closed early due to Thursday's holiday.
The last five trading days of a year and the first two trading days of a new year are traditionally upbeat for the market, with the period translating to an average gain of 1.5 percent for the Dow industrials since 1950, according to the Stock Trader's Almanac.
On the move
Market breadth was positive. On the New York Stock Exchange, winners edged losers as 1.09 billion shares traded. On the Nasdaq, advancers beat decliners by nearly three to two as 1.64 billion shares traded hands.
IBM (IBM: down $1.13 to $91.55, Research, Estimates) lost 1.2 percent in response to the overall downturn and following a bearish note out of Bear Stearns which said the company could miss its target for new computer services deals in the fourth quarter by $1 billion to $2 billion. Computer services provides about half of the company's revenue.
It was one of many Dow stocks that closed in the red.
One positive was AT&T (T: up $0.57 to $20.87, Research, Estimates), which gained 2.8 percent after a report Thursday said that the company had raised rates for some customers by charging a monthly fee.
Satellite radio provider Sirius Satellite Radio (SIRI: up $0.66 to $3.82, Research, Estimates) added another nearly 21 percent and topped the Nasdaq's most-actives list. The stock has gained more than 40 percent in the last week as investors continue to bet that satellite radio will surge in 2004, as the company continues to add subscribers.
On the downside, shares of AmerisourceBergen (ABC: down $2.15 to $54.00, Research, Estimates) fell 5.1 percent in active NYSE trade. The company said Wednesday that it lost a $3 billion government contract to rival McKesson and that as a result, 2004 earnings will miss estimates. On Friday, Merrill Lynch downgraded the drug distributor to "neutral" from "buy."
In other markets, the dollar continued to slide versus the euro and the yen. The U.S. precious metals and oil markets remained closed Friday for the holidays.
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