Dow Finishes 1st Up Week in Last Three

Modest gains Friday enabled the stock market to notch its first winning week in the last three, but portfolio managers said they still expected no reliable recovery until the Iraq crisis is resolved.

Although Thursday’s strong stock rally had a carry-over effect, Wall Street pros noted that U.S. economic data released Friday were lackluster at best, indicating that consumers and corporate America clearly remain concerned about the geopolitical situation.

“I can’t see any real continuation of this rally until people’s expectations become more optimistic,” said Steve Colton, manager of the Phoenix-Oakhurst Growth & Income fund in Scotts Valley, Calif. “The longer Iraq drags on, the more of a drag it is on the economy. Before businesses and consumers start spending again, there needs to be some resolution.”

In active trading Friday, the Dow Jones industrial average rose 37.96 points, or 0.5%, to 7,859.71, and the Standard & Poor’s 500 index gained 1.37 points, or 0.2%, to 833.27. The tech-heavy Nasdaq composite index dipped 0.44 point, or less than 0.1%, to 1,340.33.

For the week, the Dow climbed 1.5%, the S&P; 0.5% and the Nasdaq 2.7%.

European indexes also rallied Friday, including a 7.3% surge in France and gains of 3.3% in Britain and 2.1% in Germany. In Japan, the Nikkei 225 index added 1.7%.

Investors in the U.S. appeared to shrug off economic data pointing to weakness on several fronts. The University of Michigan’s consumer confidence survey fell in March, marking its third straight monthly decline, and wholesale inflation jumped in February.

“There’s nothing to do cartwheels over,” said Chris Orndorff, head of equities at Los Angeles-based money manager Payden & Rygel.

Orndorff said the rally of the last three sessions may be attributable in part to money managers’ getting a jump on their first-quarter “window dressing” -- lowering their cash positions by buying hot stocks that might spruce up their portfolios when they report quarterly results after the end of March.

Crude oil prices dropped, offering some relief from recent high energy prices. Near-month futures in New York fell 63 cents to $35.38 a barrel on expectations that a Sunday meeting of President Bush with the leaders of Britain and Spain could signal the end of diplomacy that has delayed military action against Iraq, analysts said.

“There could be imminent action,” analyst Marshall Steeves of Refco Group in New York told Bloomberg News. “The invasion should be short-lived.”

Treasury yields, which had climbed sharply Thursday, slipped as war fears and economic pessimism prompted some investors to shift money into fixed income. The yield on the benchmark 10-year T-note eased to 3.70% from 3.75% on Thursday.

In other trading, gold rose 60 cents to $336.50 an ounce in New York, and the dollar was mixed against the yen and the euro.

In other highlights:

* Blue-chip gainers lifting the Dow included McDonald’s, up 74 cents to $13.54; Hewlett-Packard, up 66 cents to $15.66; and Honeywell International, up 89 cents to $22.47.

* Automakers fell after Ford Motor said it would cut second-quarter vehicle production because of the weak U.S. economy and war fears. Ford fell 37 cents to $6.76, General Motors lost 60 cents to $32, and DaimlerChrysler slipped 99 cents to $27.51.

* Brokerage analyst downgrades dinged several stocks, including retailer Bebe Stores, which slid $2.34 to $12.01, and publisher Knight-Ridder, which fell $1.30 to $59.85.

Market Roundup, C4-5