Stocks Finish Mixed Ahead of Weekend

Investors grew cautious as they waited the next phase of the battle for Baghdad. Amid war news, next week brings updates on earnings and key economic data

Stocks finished mixed Friday, ending another week of market gyrations caused by reaction to war headlines coming out of Iraq.

The Dow Jones industrial average added 36.00 points, or 0.44%, to 8,276.38. Dow component Altria Group (MO ) pressured the blue-chip index after Fitch Ratings cut credit ratings of the company late Thursday, due to heightened risk of litigation and losses facing the industry.

Meanwhile, the tech-heavy Nasdaq composite index fell 13.10 points, or 0.94%, to 1,383.48. Software stocks were led lower by PeopleSoft (PSFT ), which warned that it would have another quarter of weak earnings due to the Iraq war.

The broader Standard & Poor's 500-stock index gained 2.37 points, or 0.27%, to 878.82.

War remains the market's primary focus, with investors trying to make sense of good and bad news. In the latest developments, U.S. Marines reported that about 2,500 Iraqi Republican Guards surrendered on the route to Baghdad. On Thursday bombing of Baghdad's airport began while large sections of the Iraqi capital lost power.

"So far, markets are taking an optimistic view of the war," says Standard & Poor's chief economist David Wyss. "The quick collapse of the Iraqi army, however, may not mean an end to the fighting. Uncertainty about Saddam's fate remains a factor."

Thousands of boxes of white powder, nerve agent antidote and instructions in chemical warfare were found at an industrial site south of Baghdad, according to media reports. Saddam Hussein appeared on state television encouraging Iraqis to fight U.S.-led troops at the gates of Baghdad. A video also showed him walking through Baghdad. The Iraqi information minister also said the military would launch an "unconventional" counterattack against the coalition troops.

Caution is certainly in order. Even as coalition troops seem to be making progress, the battle for Baghdad is just starting, says Wyss, and it may not end quickly. "There are also worries about the long-term impact on surrounding governments. Unless the underlying causes of unrest are addressed, the benefits could be minor. Attention has been diverted temporarily from the Israeli-Palestinian issue, but the focus will shift back in the Arab world."

In corporate news, McDonald's (MCD ) is expected to announce details on its plan to overhaul its strategy. It is expected to unveil plans to pull back from refurbishing its hamburger outlets to pare a budget it can no longer afford, analysts said.

An update from Dow industrials member Alcoa (AA ) after the market close Friday started first-quarter earnings season on a positive note. The aluminum company reported earnings per share of 23 cents. Analysts were expecting fiscal first quarter earnings per share of 21 cents, down from last year's 22 cents.

Other big-name companies are set to report earnings late next week: Abbott Labs (ABT ) and Constellation Brands (STZ ) on Wednesday, SunTrust (STI ) on Thursday, and General Electric (GE ) on Friday.

Meantime, the economy continues to show weakness. The payroll report Friday was mixed. The report showed that the unemployment rate in March held steady at 5.8%. But non-farm payrolls declined 108,000, more than twice the average expectation of a 50,000 decline. A bounce-back from the stormy weather in February was not as much of a boost as expected, says economic research outfit MMS International.

More economic data are coming next week. Investors on Monday will get an update on February consumer credit. A report on February wholesale trade Tuesday will be followed by a mortgage applications update on Wednesday. On Thursday, investors will get the latest weekly jobless claims update and important prices data. Friday will bring the latest readings on the producer price index and retail sales.

Treasury Market

Treasuries finished mostly lower, but up from earlier session lows, as the latest war reports suggested more difficulty ahead for coalition forces.

World Markets

European markets finished higher amid the latest encouraging reports on the war front. In London, the Financial Times-Stock Exchange 100 index finished up 43.30 points, or 1.15%, to 3,814.40. In Germany, the DAX added 84.26 points, or 3.28%, to 2,654.07. In France, the CAC 40 Index gained 49.27 points, or 1.77% to 2,837.96.

Asia markets finished up. In Tokyo, the Nikkei 225 index added 56.37 points, or 0.70%, to close at 8,074.12. In Hong Kong, the benchmark Hang Seng index gained 174.29 points, or 2.02%, to close at 8,822.45.

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