Rally Fizzles on Concerns Over World Tensions

Pleased by encouraging economic reports but wary about world events going into a weekend, investors backed away from a solid rally Friday, leaving stocks mixed.

An early triple-digit advance among blue-chip shares was the first sign of life in the market after a weeklong decline caused by a string of discouraging corporate news reports.

But share prices retreated in the final two hours of trading, with investors worried about the possibility of terror attacks and the worsening tensions between nuclear powers India and Pakistan.

Adding to fears, the U.S. government said it authorized the departure of nonemergency staff from India.

“It’s end-of-the week jitters. There are enough things to worry about in the world that could go wrong,” said Arthur Hogan, chief market analyst at Jefferies & Co.

The Dow Jones industrial average inched up 13.56 points, or 0.1%, at 9,925.25, having gained as much as 130 points earlier in the session.

Friday’s advance broke the Dow’s four-session, 304-point losing streak but did little to save the blue chips from ending the week down 1.8% and the month off 0.2%.

The broader market was mixed Friday but ended the week negative.

The Nasdaq composite index fell 16.19 points, or 1%, to 1,615.73 after climbing as much as 19.55 points earlier. Nasdaq lost 2.8% for the week and 4.3% for the month.

The Standard & Poor’s 500 index rose 2.48 points, or 0.2%, to 1,067.14. The S&P; finished the week down 1.5% and the month off 0.9%.

The Russell 2000 index, a barometer of the stocks of smaller companies, slipped 0.36 point, or nearly 0.1%, to 487.47. For the week, the Russell fell 1.3% as small-cap stocks, one of the few bright spots in the market this year, began to lose a bit of their luster. The index fell 4.5% in May.

Still, winners led losers by about 5 to 3 on the New York Stock Exchange on Friday, and winners and losers were about even on Nasdaq.

The market was encouraged by a string of positive economic news--healthy business activity in the Chicago area, a jump in U.S. worker productivity and an uptick in consumer sentiment--but caution crept back into trading as the session wore on.

“The economy is doing well, but the stock market is trying to hammer out the bottom. It’s not a new bull market yet. It’s not off to the races,” said Scott Bleier, president of Hybridinvestors.com.

Among Friday’s gainers, Home Depot rose $1.54 to $41.69, Procter & Gamble climbed 80 cents to $89.55, and UPS advanced $1.38 to $60.38 after Bear Stearns raised its rating on the stock.

But the tech sector pulled back, with Microsoft off $1.73 to $50.91 and Oracle down 50 cents to $7.92.

Friday’s losers included companies that issued weaker-than- expected outlooks or earnings.

Retailer Lowe’s stumbled 73 cents to $47.16 after projecting 2002 earnings below analysts’ expectations. Palm fell 62 cents to $1.59 after announcing that revenue for its fourth quarter, which ended Friday, will miss expectations and keep the maker of hand-held computers from achieving profitability.

In currency markets, the dollar got a bigger lift from the economic data than did stocks: After sinking all week, the dollar rose to 124.38 yen from 123.05 on Thursday. The euro fell to 93.1 cents from 93.8.

Treasury bond yields inched up, and gold and oil rose modestly.

In other market news:

* Drug company Bristol-Myers Squibb rose $1.27 to $31.12 and Europe’s top drug maker GlaxoSmithKline dropped $1.31 to $40.75 on published reports that the industry heavyweights have held preliminary discussions about the possibility of a merger.

* Shares of department stores jumped on hopes that consumer spending will drive the economic rebound. S&P;’s department stores index was the best-performing group in the S&P; 500, rising 3.1%. Federated Department Stores rose $1.11 to $41.41, and Sears, Roebuck added $1.81 to $59.05.

* Restaurant chain Dave & Buster’s rallied $1.54, or more than 14%, to $12.13 after saying it agreed to be bought by a management-led investment group for $155 million.

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Market Roundup, C4-5