updated 6/21/2004 9:32:12 AM ET 2004-06-21T13:32:12

Investors overcame their concerns about inflation and mounting trade deficits to push stocks moderately higher Friday, but the major indexes ended the week mixed as nervousness mounted over the Federal Reserve’s pending decision on interest rates.

Major Market Indices

America’s current account deficit, the broadest measure of U.S. trade, reached an all-time high in the first quarter of 2004, but there was little apparent worry that consumers’ appetite for foreign goods could cause prices to spike higher — an inflationary trigger that could prompt the Fed to abandon its promise of a measured hike in interest rates.

Friday was a “triple witching” day on Wall Street — when options and futures contracts expire — which customarily means increased volatility in individual stock prices. However, overall volatility was low even as prices rose.

“It’s really hard to say how much of this is due to witching, but I guess there’s some of it in there,” said Scott Wren, equity strategist for A.G. Edwards & Sons. “With the data that’s out there, there’s definitely some inflation worries, but the markets seem to be leaving that out. If they are, it’ll still be a short reprieve.”

At the close, the Dow Jones industrial average was up 38.89 points, or 0.4 percent, at 10,416.41.

Broader stock indices were modestly higher. The Standard & Poor’s 500-stock index was up 2.97 points, or 0.3 percent, at 1,135.02, and the Nasdaq composite index was up 3.06 points, or 0.2 percent, at 1,986.73.

For the week, the Dow gained 0.1 percent, while the Nasdaq dropped 0.7 percent and the S&P 500 fell 0.1 percent. It was the fourth straight week of gains for the Dow, while the S&P 500 fell after three up weeks. The Nasdaq reversed a single week of gains.

The Commerce Department reported that the current account deficit, which also includes the flow of investment dollars and foreign aid along with the trade of goods and services, rose to a record $144.9 billion in the quarter ending in March, surpassing the record set a year ago. The figure was higher than economists forecast.

Oil prices also rose as the head of OPEC said non-OPEC nations would have difficulty raising output to help make up for the loss of Iraq’s oil due to sabotage there. Investors have been worried that a rise in oil prices would trigger a more general inflationary spike.

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The Federal Reserve will meet June 29, and it is widely expected to raise the nation’s benchmark interest rate by at least 0.25 percent, with the possibility of an 0.5 percent hike not out of the question should the economic data over the next two week show further signs of inflationary pressure.

However, some analysts believe investors might have already priced an interest rate hike into the market, and could be looking ahead to second-quarter earnings, due out next month, which are expected to once again exceed expectations. That would explain Friday’s rise in stock prices despite the trade deficit.

“The key is what corporate earnings are going to do, and I think the expectations there are good,” said Hans Olsen, managing director and chief investment officer at Bingham Legg Advisers. “They’re anywhere from 50 to 80 percent higher than what people were thinking at the beginning of the year. And when all this noise about inflation is taken away, that’s what’s going to push the markets.”

General Motors Corp. rose 21 cents to $47.98 after announcing a plan to streamline its European operations, bringing underperforming brands such as Saab and Vauxhall under a single management structure.

Archer Daniels Midland Co. said it will pay $400 million to settle a federal antitrust lawsuit accusing the company of fixing the price of high fructose corn syrup. ADM was up 7 cents at $16.28.

Red Hat Inc. plunged $2.29 to $20.10 after the Linux software distributor announced earnings in line with analysts’ expectations late Thursday. However, the company’s earnings guidance for future quarters was disappointing to many investors, and Red Hat saw its investment rating cut to neutral by First Albany early Friday.

The J.M. Smucker Co. saw its quarterly profits fall from a year ago due to lagging sales of its Crisco oil products as well as costs associated with its $800 million acquisition of International Multifoods. Smucker gained a penny to $46.51.

Advancing issues outnumbered decliners by about 5 to 4 on the New York Stock Exchange, where volume came to 1.07 billion shares, compared with 971.13 million at the same point Thursday. At the close, the Russell 2000 index of smaller companies was up 0.97 point, or 0.2 percent, at 570.54.

Overseas, Japan’s Nikkei stock average skidded 2 percent. In Europe, Britain’s FTSE 100 closed up 0.3 percent, France’s CAC-40 gained 0.6 percent for the session and Germany’s DAX index rose 0.4 percent.

© 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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