Modest Gains in Stocks

Investors overcame their concerns about inflation and rising trade deficits to push stocks moderately higher Friday, but the major indexes ended the week mixed as nervousness mounted over the Federal Reserve’s pending decision on interest rates.

Friday was a “triple witching” day on Wall Street -- when options and futures contracts expire -- which customarily means increased volatility in individual stock prices. However, overall volatility was low even as prices rose.

“It’s really hard to say how much of this is due to witching, but I guess there’s some of it in there,” said Scott Wren, equity strategist for A.G. Edwards & Sons. “There’s definitely some inflation worries, but the markets seem to be leaving that out.”

The Dow Jones industrial average gained 38.89 points, or 0.4%, to 10,416.41.

Broader stock indicators were modestly higher. The Standard & Poor’s 500 index was up 2.97 points, or 0.3%, at 1,135.02, and the Nasdaq composite index rose 3.06, or 0.2%, to 1,986.73.

Advancing issues outnumbered decliners by about 5 to 4 on the New York Stock Exchange.

For the week, the Dow gained 0.1%, while Nasdaq dropped 0.7% and the S&P; 500 fell 0.1%. It was the fourth straight week of gains for the Dow, while the S&P; 500 fell after three up weeks. Nasdaq reversed a single week of gains.

Crude oil rose 29 cents, to $38.75 a barrel, after a U.S. contractor was killed in Saudi Arabia, raising the prospect that foreign workers will leave the world’s biggest oil exporter.

In other markets, gold hit a three-week high, rising $6.20 to $395.70 an ounce in New York trading. The appeal of bullion is being boosted by speculation that the rising energy costs will spur inflation.

Yields on the benchmark 10-year U.S. Treasury note rose to 4.71%, up from 4.68% on Thursday. The dollar fell to a six-week low against the yen and dropped against the euro after the Commerce Department reported that the U.S. current-account deficit, a broad measure of trade, widened to a record $144.9 billion in the first quarter.

The Federal Reserve will meet June 29, and it is widely expected to raise the nation’s benchmark interest rate by at least a quarter-point, with the possibility of a half-point hike not out of the question.

However, some analysts believe investors may have already priced an interest rate hike into the market, and could be looking ahead to second-quarter earnings, due next month, which are expected to exceed expectations. That would explain Friday’s rise in stock prices despite the trade deficit.

In Friday’s market highlights:

* With gold prices rising, shares in Newmont Mining, the world’s No. 1 gold producer, jumped 57 cents to $39.12. Freeport McMoran Copper & Gold, owner of the world’s largest gold mine, advanced 82 cents to $32.52.

* Blackboard surged $6.01, or 43%, to $20.01 in its first day of trading. The provider of software to the education industry sold $77 million of stock in an initial public offering.

* Red Hat plunged $2.29 to $20.10 after the Linux software distributor announced earnings in line with analysts’ expectations late Thursday. However, the company’s earnings forecasts were disappointing to many investors.

Market Roundup, C4