Stocks finished higher in slow trading Friday, as crude prices fell and a Federal Reserve official offered a balanced tone on inflation. Investors were also assessing a slowing housing market.
The Dow Jones industrial average rose 60.67 points, or 0.54%, to 11,392.11, paced by Wal-Mart (WMT) and McDonald's (MCD) en route to a 0.6% decline on the week. The broader Standard & Poor's 500 index added 4.9 points, or 0.38%, to 1,298.92, finishing the week down 0.9%. The tech-heavy Nasdaq composite gained 10.5 points, or 0.49%, to 2,165.79, for a weekly loss of 1.2%.
NYSE breadth was decidedly positive, with 20 issues advancing for every 13 declining. Nasdaq breadth was 15-14 positive.
Cleveland Fed President Sandra Pianalto helped soothe investors' inflation worries Friday. Pianalto is concerned about inflation but believes the Fed's pause from interest-rate hikes was appropriate given the slowing economy, she told an Oak Brook (Ill.) audience. The remarks were less hawkish on inflation than some expected, says Action Economics.
Still, the Fed may have to hike rates again before the end of the year, some analysts say. "Our reading of the latest monthly macro data suggests that the economy is still growing at about its underlying trend rate, and inflation pressures are not likely to lessen," says Steven Ricchiuto, chief U.S. economist at ABN Amro. "The risks to monetary policy still favor additional fine-tuning rate hikes between now and the end of 2007."
The economic calendar next week kicks off with July international trade figures on Tuesday, followed by the August Treasury budget on Wednesday. Key data releases later in the week are set to include retail sales, business inventories, inflation, industrial production, and consumer sentiment.
In corporate news, Hewlett-Packard (HPQ), down 3% the previous three sessions, was higher despite reports California's attorney general has threatened to bring criminal charges over the computer maker''s secret investigation of its own board members.
The housing market showed further signs of slowdown. Homebuilder Lennar (LEN) reduced its third-quarter earnings outlook, a day after peers KB Home (KBH) and Beazer Homes (BZH) each cut their full-year earnings guidance.
Software giant Microsoft (MSFT) gained on news the company plans to launch a cheaper version of its Xbox 360 game console in Japan before Sony (SNE) releases its rival PlayStation 3.
Chipmaker National Semiconductor (NSM) was modestly higher despite forecasting a 2% to 5% drop in fiscal second-quarter revenue.
The stock-options probe continued to expand. Broadcom (BRCM) was lower after the chip supplier said it found more stock-options errors and now plans to expense at least twice as much as previously projected in additional options-related compensation costs.
Elsewhere, a BP (BP) executive told Congress the oil heavyweight could get its Prudhoe Bay pipeline in Alaska pumping out its usual 400,000 barrels a day by the end of October.
On the analyst front, Borders (BGP) was higher after Credit Suisse raised its recommendation on the bookseller from neutral to outperform.
In the energy markets, October West Texas Intermediate crude oil futures closed down $1.07 at $66.25 a barrel amid ample supply expectations.
European markets finished modestly higher. In London, the Financial Times-Stock Exchange 100 index rebounded 21.2 points, or 0.36%, to 5,879.3. Germany's DAX index rose 21.54 points, or 0.37%, to 5,795.26. In Paris, the CAC 40 index was up 13.48 points, or 0.27%, to 5,073.57.
Asian markets ended slightly higher. Japan's Nikkei 225 index gained 68.05 points, or 0.42%, to 16,080.46. In Hong Kong, the Hang Seng index bounced 49.32 points, or 0.29%, to 17,145.76. Korea's Kospi index advanceed 3.72 points, or 0.28%, to 1,354.89.
Treasury yields dipped after the Fed's Pianalto sounded a balanced note on inflation. The 10-year note rose in price to 100-25/32 for a yield of 4.77%, while the 30-year bond climbed to 93-18/32 for a yield of 4.92%.