Stocks rebounded from an earlier decline to post moderate gains Friday as investors looked past a mediocre outlook from Dow Jones industrial Pfizer Inc. and a new record U.S. trade deficit. The major indexes finished the week mixed.
Pfizer’s profit warning dragged the Dow into negative territory for most of the day and added to traders’ concerns about weak overall corporate earnings in 2006 amid a slowing economy. A fourth straight record trade deficit of $725.8 billion last year also left Wall Street wondering whether rising energy and import prices could spark domestic inflation.
But the market managed to recoup its losses and pressed higher late in the day, giving the Dow a sturdy advance this week. Analysts have been expecting volatility among stocks following January’s rally and with no major events on the horizon to clarify investors’ uncertainty about the economy.
Steven Goldman, chief market strategist for Weeden & Co., said traders were assessing the latest round of earnings reports and whether stocks are fairly priced — or even overpriced. He added that the widening gap between short- and long-term bond yields also stoked worries about a downturn.
“To me, valuation on the average stock has reached fully valued territories,” Goldman said. “If you look at price-to-earnings-ratios, they’re within 7 percent of the all-time high.”
At the close of trading, the Dow rose 35.70, or 0.33 percent, to 10,919.05, after losing as much as 63 points early in the session.
Broader stock indicators also reversed course to close higher. The Standard & Poor’s 500 index gained 3.21, or 0.25 percent, to 1,266.99, and the Nasdaq composite index advanced 6.01, or 0.27 percent, to 2,261.88.
Bonds pulled back from an early runup, with the yield on the 10-year Treasury note jumping to 4.58 percent from 4.55 percent late Thursday. The two-year Treasury yield was up at 4.68 percent, but the inversion of the yield curve signaled a lack of short-term confidence and, some traders believe, foreshadowed a possible economic slide.
Meanwhile, the dollar was down against most major currencies, as gold prices plunged.
Crude futures slipped following a report suggesting that high prices were starting to stifle demand. The drop came even as concerns about political unrest in oil-producing countries persisted, with a barrel of light crude losing 78 cents to settle at $61.84 on the New York Mercantile Exchange.
This week, the Dow jumped 1.16 percent; last week, the index skidded 113 points after gaining 240 points the week before. The S&P 500 added 0.23 percent and the Nasdaq declined 0.23 percent for the week.
“Advancing issues were even with decliners on the New York Stock Exchange, where volume of 1.7 billion shares lagged the 1.78 billion shares that changed hands on Thursday.
The Russell 2000 index of smaller companies lost 1.03, or 0.14 percent, to 717.13.
Overseas, Japan’s Nikkei stock average tumbled 1.11 percent. Britain’s FTSE 100 slid 0.77 percent, Germany’s DAX index lost 0.73 percent and France’s CAC-40 was lower by 0.91 percent.