Stocks finish mostly up despite disappointments

Stocks closed mostly higher Friday even though profit reports and forecasts from blue-chip names such as IBM and General Electric failed to impress Wall Street.

Profit concerns have unnerved investors already made skittish by the recent tug-of-war over whether stocks will move higher in 2007 with the same resolve as in 2006.

Recent weakness in technology stocks had upset Wall Street; tech stocks regained some ground a day after the Nasdaq composite index posted its biggest drop since late November but were still down for the week.

“I think we’re at an extremely pivotal psychological level,” said T.J. Marta, economic strategist at RBC Capital Markets.

He said earnings and economic data supported the Federal Reserve’s notion that the economy could pull off a soft landing. Marta contends Wall Street is mulling over whether the economy will do a “fly-by” and skip a soft landing entirely with growth continuing apace.

The Fed is unlikely to lower short-term interest rates if the economy continues at a steady clip or if it begins to accelerate again.

The central bank has left interest rates unchanged at its last four meetings after a string of 17 straight increases that began in 2004.

Last year, investors propelled stocks sharply higher partly on the widely held view that the Fed would cut rates perhaps as early as the first half of 2007.

The Dow Jones industrial average closed down 2.40 points, or 0.02%, at 12,565.53.

Broader stock indicators were higher.

The Standard & Poor’s 500 index rose 4.13 points, or 0.3%, to 1,430.50 and the Nasdaq rose 8.10 points, or 0.3%, to 2,451.31.

Despite the modest movement in the major indexes, advancing issues outnumbered decliners by about 2 to 1 on the New York Stock Exchange.

For the week, the Dow industrials rose 0.1%, the S&P; was virtually unchanged and the Nasdaq lost 2.1%.

Bond yields rose Friday after a surprisingly strong reading of January consumer sentiment reinforced the view that the Federal Reserve would not cut interest rates anytime soon.

The yield on the benchmark 10-year Treasury note rose to 4.78% from 4.74% on Thursday.

Consumer sentiment, as tracked by the University of Michigan’s survey, showed a preliminary reading of 98 for January, compared with 91.7 in December.

It was the highest showing since January 2004.

Since the start of 2007, investors have been looking for reasons that the sharp gains that stocks enjoyed last year might continue. In 2006, double-digit earnings growth helped propel stocks higher.

Although many recent fourth-quarter earnings reports have been solid, some forecasts have prompted Wall Street to adopt a more cautious tone.

The tepid gains in stocks this year signal investors’ concerns about interest rates and the Fed’s next move as well as whether profit growth will remain sufficient to push stocks upward.

In other market highlights:

* Crude oil futures rose $1.51 to $51.99 a barrel in New York trading. The increase, which followed sharp declines in recent sessions, buoyed energy stocks. Exxon Mobil rose $1.57, or 2.2%, to $73.53.

IBM fell $3.28, or 3.3%, to $96.17 after the company’s better-than-expected fourth-quarter profit met with little enthusiasm from investors.

Alcoa rose $1.10, or 3.6%, to $31.40 after the world’s largest aluminum maker said it would repurchase as much as 10% of its shares and increased its annual dividend rate to 68 cents from 60 cents.

* General Electric slid $1.05, or 2.8%, to $36.95 after the conglomerate’s first-quarter forecast disappointed some investors. The company also said it planned to restate financial results from 2001 through 2005 and the first three quarters of 2006 to adjust its accounting for some debt.

* Abbott Laboratories closed up 73 cents at $53.52, passing a previous 52-week high of $52.92, after striking a deal to sell a portion of its medical testing business to Genearl Electric for $8.13 billion.

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Reuters was used in compiling this report.