Union Carbide Woes Diminish Dow

A weak profit forecast by Union Carbide held back the Dow Jones industrial average, but most stock measures rose Friday as interest rates continued a weeklong drop in the bond market.

The Dow was off 37 points with just a half-hour left to trading but closed just 5.45 lower at 7,917.27, trimming the week’s gain at 174.30. If not for big drops by Union Carbide and International paper, the blue-chip barometer would have shown a modest gain for the day.

Broader stock indicators struggled in the morning but turned positive around midday to extend several record-setting streaks.

The Russell 2000 index of smaller companies closed at a record high for the sixth consecutive session and for the 15th time in 17 sessions. Also setting new highs were the Nasdaq composite index and the American Stock exchange composite index.

Once again, stocks drew a boost from the red-hot bond market, which has been rising since last Friday’s release of some mild inflation data.

That report on wholesale prices and Tuesday’s tame reading on retail prices have helped soothe worries that the economy is accelerating at an inflationary pace that will force the Federal Reserve to slow things down with higher interest rates.

“There is the belief that inflation will continue to stay low and that bonds still represent a good value,” said Richard E. Cripps, chief market strategist for Legg Mason of Baltimore. Low inflation makes a fixed-income investment such as bonds more attractive.

As bond prices have risen, the yield on the 30-year Treasury - another key determinant of borrowing costs - has fallen from 6.69 percent to 6.37 percent, the lowest level since late July.

With no major economic reports released during the session, trading was dominated by the expiration of futures and options contracts on stocks and stock indexes - a quarterly event known as “triple witching.”

Union Carbide fell 4-1/8 - or the equivalent of 14 Dow points - to 49-1/2 after the chemical maker warned late Thursday that its third-quarter profits won’t meet analyst forecasts. The Dow’s other big loser was International Paper, which slid 3-1/8 to 54-15/16 as investors secured some of this week’s gains by that company’s shares.

Notably, however, the news on Union Carbide failed to aggravate the recent profit worries that have plagued the blue-chip sector. Analysts noted that the quarterly stream of pre-earnings report warnings hasn’t been terribly unsettling this time around.

“There’s no theme to (the warnings). They’ve been real company-specific as opposed to industry-specific,” said Cripps. “That gives confidence to investors here that these third-quarter reports will look pretty good.”

Declining issues outnumbered advancers by a narrow margin on the New York Stock Exchange, where the volume totaled a hefty 630.54 million shares as of 4 p.m., up from 566.85 million on Thursday.

Overseas, Tokyo’s Nikkei stock average rose 0.7 percent, Frankfurt’s DAX index rose 0.8 percent and London’s FT-SE 100 fell 0.4 percent.