Dow Slips but Most Indexes End Week Up

A downbeat profit forecast by Union Carbide held back the Dow Jones industrial average on Friday, but most stock indexes rose as bond yields continued a weeklong drop.

Elsewhere, the dollar rose to a four-month high against the Japanese yen after U.S. officials said they would not step up pressure on Japan to reduce its trade surplus at the Group of Seven meeting today in Hong Kong.

On Wall Street, stocks had a fairly tame day, despite the quarterly triple expiration of key stock index options and futures contracts (the “triple witching”), which can often generate wild price swings as traders close out complicated trades.

The Dow ended down 5.45 points at 7,917.27. It was off more than 50 points late in the session.

But the blue-chip index’s loss primarily owed itself to Union Carbide’s drop of $4.06 to $49.56, after the chemicals company late Thursday said its current-quarter earnings won’t meet expectations.

Most Dow stocks finished higher. And nearly all broader indexes rose, with the Nasdaq composite adding 10.34 points to a record 1,680.36 and the Russell 2,000 index of smaller stocks rising 0.67 point to a record 447.17, the 15th new high in 17 sessions.

Still, the Dow actually outpaced the Russell index for the week, thanks to Tuesday’s 175-point surge. The Dow rose 2.3% for the week while the Russell gained 1.6%. Year-to-date, the Dow is up 22.8%, the Russell 23.3%.

Stocks were supported on Friday by another rally in the bond market, albeit a mild one. The 30-year Treasury bond yield dipped to 6.37% from 6.40% on Thursday, and is now the lowest since July 31. It was at 6.62% a week ago.

The week was the bond market’s best in more than a year, as investors saw more data indicating that inflation is subdued despite healthy economic growth.

“The market has reason to be optimistic,” said Lauren Best, who helps manage $2 billion of bonds at Advisers Capital Management. Bonds can rally further “if we continue to get good information.”

The Federal Reserve Board meets on Sept. 30, and it is expected to leave official short-term interest rates alone.

For stocks, the focus continues to be on earnings forecasts. A steady stream of big-name companies have already warned about weaker-than-expected third-quarter earnings, with the strong dollar often cited as a reason.

Still, analysts are optimistic that most companies will report decent profit growth for the quarter.

Among Friday’s highlights:

* Airline stocks soared, driving the Dow transports index up 1.5% to a record 3,208.80, amid expectations for robust earnings growth. US Airways jumped $2.69 to $41.56, United Airlines’ parent UAL gained $2 to $87.88, and Delta surged $3.25 to $107.13.

* Many tech stocks showed strength, led by Adobe Systems, up $4 to $49.75 on a healthy earnings report. Microsoft rose $2.94 to $135.19, Dell gained $2.13 to $97.75 and Yahoo jumped $1.63 to $51.38.

* Amazon.com soared $7.88 to $47.38 after brokerage Morgan Stanley Dean Witter recommended the bookseller’s stock.

* Beaten-down Gillette leaped $3.94 to $88.69. The company said it would buy back up to 25 million shares over two years.

In currency trading, the dollar hit 122.28 yen in New York, a four-month high, after Treasury Secretary Robert Rubin said G-7 officials won’t issue a “dramatic” statement about the currency, a signal they’re comfortable with its strength.

Market Roundup, D4