Dow hits record but market ends flat

Stocks finished a strong week mostly flat Friday as investors tried to reconcile a weaker-than-expected estimate of first-quarter economic growth with fresh evidence that corporate profits remain robust. A modest advance in the Dow Jones industrials sent the blue chips to their third record close in as many days.

A Commerce Department report that the U.S. gross domestic product grew at an annual rate of 1.3 percent in the first quarter — its slowest pace in four years — unnerved some investors Friday and seemed to run counter to a parade of strong earnings reports that sent major indexes sharply higher during the week. The economy’s growth was below economists’ expectations and down sharply from 2.5 percent in the previous quarter.

Keeping stocks afloat, however, was another round of robust earnings news — notably from Microsoft Corp., one of the 30 companies that make up the Dow. So far, 22 of the 30 Dow components have reported earnings, and 16 have exceeded expectations.

“I think the reason the market appears to be doing better than the economy right now is the decent job managers are doing at incorporating improvements in productivity,” said Rob Lutts, chief investment officer at Cabot Money Management. “Corporations are making gains on the bottom line without making gains on the top line,” he said, referring to earnings and revenue.

The Dow Jones industrial average rose 15.44, or 0.12 percent, to 13,120.94. The Dow set a trading high of 13,148.00 Friday after surpassing 13,000 for the first time Wednesday. The Dow’s gain Friday marked the 37th record close for the index since October. For the week, the Dow rose 1.2 percent.

Broader indexes finished mixed Friday. The Standard & Poor’s 500 index slipped 0.18, or 0.01 percent, to 1,494.07, while the technology-dominated Nasdaq composite index rose 2.75, or 0.11 percent, to 2,557.21.

For the week, the S&P rose 0.7 percent, while the Nasdaq gained 1.2 percent.

The S&P 500 is about 2 percent below its high of 1,527.46, reached in March 2000. Wall Street has been eyeing the index, waiting for it to move back above 1,500; the S&P 500 hasn’t closed above that level since September 2000.

The Nasdaq, meanwhile, is slightly above the halfway point to its high, which also came in March 2000.

The bevy of profit reports and economic figures has left Wall Street grappling with at times seemingly disparate signals about the direction of stocks. Slowing economic growth could prompt the Federal Reserve to lower short-term interest rates, giving a boost to stocks, but rising inflation could prevent the central bank from making a cut. Meanwhile, a weak dollar helps exporters, but hurts importers.

“As long as our economy doesn’t really slow down and go into big negative mode, then profits can continue to grow and the markets will probably do OK,” Lutts said, noting that while the economy slowed in the first quarter, it did not contract.

In addition to the GDP data, investors examined the Reuters/University of Michigan consumer sentiment index, which rose to 87.1 in April from a preliminary reading of 85.3 but fell from 88.4 in March.

Bonds were little changed; the 10-year yield was flat at 4.70 percent from late Thursday.

Light, sweet crude settled up $1.40 at $66.46 per barrel on the New York Mercantile Exchange, rising late in the session after Saudi Arabia arrested 172 militants, some of whom it said planned to attack oil fields.

Gold prices rose.

Declining issues outnumbered advancers by about 3 to 2 on the New York Stock Exchange, where consolidated volume came to 2.7 billion shares, down from the heavy 3.14 billion shares traded Thursday.

The Russell 2000 index of smaller companies fell 4.10, or 0.49 percent, to 829.70.

Stock markets overseas fell. Japan’s Nikkei stock average slipped 0.16 percent, while Britain’s FTSE 100 ended down 0.78 percent, Germany’s DAX index lost 0.12 percent, and France’s CAC-40 declined 0.23 percent.