updated 9/13/2004 9:33:27 AM ET 2004-09-13T13:33:27

A sharp decline in oil prices and a surprise drop in wholesale prices pushed stocks higher Friday as investors’ concerns about third quarter earnings were mitigated. The Nasdaq composite index surged with investors buying heavily into an oversold technology sector.

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Oil prices fell briskly through the afternoon, again moving below $43 per barrel after spiking higher on Thursday. A barrel of light crude settled at $42.81, down $1.80, on the New York Mercantile Exchange.

Investors welcomed the 0.1 percent drop in the Producer Price Index, the Labor Department’s measure of wholesale prices, since the news was a strong sign that the economy has still managed to keep inflation at bay despite this summer’s rising oil costs.

A profit warning from Alcoa Inc., which slashed its third-quarter forecast by about 40 percent, weighed heavily on investors’ minds and kept the Dow Jones industrial average lower for most of the session. Automotive systems manufacturer Visteon Corp.’s warnings drove new fears about the health of the auto market and overall consumer spending.

“I think investors have become a bit spoiled with all the positive pre-announcements and upside earnings surprises we’ve had over the last year,” said Jack Caffrey, equities strategist at J.P. Morgan Private Bank. “Companies have been guiding up over the last several quarters, and now investors have become overly enthusiastic. It behooves companies to keep expectations reasonable. And we’re still seeing profit growth, it’s just that it’s moderated.”

The Nasdaq gained 24.66, or 1.3 percent, to 1,894.31.

Other stock indicators also moved higher. The Standard & Poor’s 500 index was up 5.54, or 0.5 percent, at 1,123.92, and the Dow Jones industrial average rose 23.97, or 0.2 percent, to 10,313.07.

For the week, the Dow rose 0.5 percent and the S&P was up 0.9 percent, while the Nasdaq soared 2.7 percent, though the tech-focused index remains down 5.4 percent for the year.

New uncertainties kept stocks volatile through the week, with concerns over employment, oil prices and earnings all weighing on Wall Street. Positive earnings outlooks from Nokia Corp. and Texas Instruments Inc. boosted long-suffering tech stocks and the Nasdaq, while blue chips suffered from muddled economic data and negative outlooks.

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Friday’s drop in wholesale prices was encouraging considering that, aside from food and oil prices, which can vary widely, the “core” PPI also fell 0.1 percent, showing that wholesale prices have become somewhat resilient to the high energy costs that have plagued Wall Street through the summer. Economists had been expecting a 0.2 percent increase in both PPI and core PPI.

“We had good news on the PPI, but you still have the nagging problem of energy prices,” said Joseph Battipaglia, chief investment officer at Ryan Beck & Co. “The economy is expanding, but not at a robust pace, certainly, and profits are decelerating. There’s nothing to prompt us breaking out of this particular range we’re in.”

The economic data, combined with worrisome third-quarter profit warnings, raised new questions about whether the Federal Reserve needs to raise interest rates at its Sept. 21 meeting. The Fed is widely expected to raise the benchmark lending rate from 1.5 percent to 1.75 percent. However, the unevenness of the economic recovery — lagging jobs, a lack of inflationary pressure and underperforming companies — combined with the election could persuade the Fed to hold off on a rate hike until after Nov. 2.

Alcoa fell $2.54 to $30.75 after reducing its forecasts for the third quarter due to labor issues and plant closings. Alcoa expects to earn 30 cents to 35 cents per share, far less than Wall Street’s forecast of 52 cents a share.

Visteon cited Ford Motor Co.’s cutbacks in production as a factor in taking a one-time charge of up to $900 million in the third quarter. The company also warned that profits in the second half of 2004 and for the full year will be “significantly below” expectations. Visteon tumbled $1.00, or 11 percent, to $8.00, while Ford slipped 21 cents to $13.96.

A federal judge late Thursday cleared the way for Oracle Corp.’s $7.7 billion proposed takeover of rival PeopleSoft Inc., dismissing a federal antitrust suit that sought to block the hostile effort. Oracle was up 53 cents at $10.46, while PeopleSoft, which said it will still fight the takeover, surged $1.84 to $19.79 on speculation that Oracle would sweeten its offer.

The Walt Disney Co. gained 30 cents to $23.16 after chief executive Michael Eisner announced that he would step down as the company’s longtime leader on Sept. 30, 2006. Eisner, who relinquished the chairmanship of the company this year amid controversy, said his early announcement would smooth the transition to new leadership.

Advancing issues outnumbered decliners by about 5 to 4 on the New York Stock Exchange, where volume came to 1.26 billion shares, compared with 1.36 billion on Thursday.

The Russell 2000 index of smaller companies was up 3.73, or 0.7 percent, at 569.91.

Overseas, Japan’s Nikkei stock average dropped 0.8 percent. In Europe, Britain’s FTSE 100 closed up 0.2 percent, France’s CAC-40 rose 0.7 percent for the session, and Germany’s DAX index gained 0.9 percent.

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

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