updated 1/3/2005 8:39:45 AM ET 2005-01-03T13:39:45

Stocks edged slightly lower Friday in very light New Year’s Eve trading, but the overall stock market closed the year 2004 with solid gains, chalking up a second straight positive year for Wall Street.

Major Market Indices

With no new economic data and little corporate news, stocks drifted narrowly in and out of positive territory throughout the session. Despite the day’s uncertain trading, the markets are expected to extend their yearend rally into January, if not further.

The fourth-quarter surge in the markets — moving from 2004 lows in October to 3½-year highs over the past two weeks — salvaged the markets’ returns for the year. While the year’s gains paled in comparison to 2003’s double-digit returns, the post-election rally pushed the major indexes to high single-digit returns.

“When you look at it, it’s astounding to get the kind of performance we had this year when you think about the negative effects of the bubble bursting from the ’90s, the various corporate shenanigans we had, the rise in energy prices,” said Joseph Battipaglia, chief investment officer at Ryan Beck & Co. “The year’s been very consistent with what we’ve seen in the second year of an economic recovery, and the growth we’ve seen is pretty good, all things considered.”

The Dow Jones industrial average finished Friday’s session down 17 points, or 0.2 percent, while the broader Standard & Poor’s 500-stock index was off 2 points, or 0.1 percent. The Nasdaq composite index fell 3 points, or 0.1 percent.

For the year, the Dow rose 3 percent, while the S&P 500 index added 9 percent. The Nasdaq composite also gained 9 percent.

Stocks entered 2004 riding a strong wave from the previous year, which saw the Dow rise 25 percent and the Nadsaq climb 50 percent. But a mid-year economic slowdown pushed stocks lower, and the slump was exacerbated by sharply rising oil prices in the third quarter. On Oct. 25, the Dow reached its low for the year at 9,749.99 before a post-election rally took hold.

This year’s returns were even more welcome considering the sharp rise in crude oil prices, which topped $55 per barrel in October before falling through November and December. Crude futures closed Thursday at $43.45 per barrel, down 19 cents, on the New York Mercantile Exchange, which was closed Friday.

For the year ahead, economic growth will likely continue at a calmer pace, while the falling dollar, which does raise long-term concerns regarding inflation, could actually help decrease the nation’s trade deficit, boosting manufacturing stocks.

“I think the key issue is going to be, has the dollar fallen enough to generate trade improvement?” William Dudley, chief U.S. economist for Goldman Sachs, told Associated Press Television News. “If the answer is no, that mean that economy will be a little bit softer, and the dollar will probably weaken a little bit further. If the answer is yes, then the economy will be stronger.”

Pharmaceutical stocks were one of the few areas of focus Friday. According to media reports, Eli Lilly & Co. hid reports that its popular antidepressant Prozac could cause behavioral problems. Eli Lilly dropped 73 cents to $56.77 on the news.

Embattled drug maker Pfizer Inc. received good news from the U.S. Food and Drug Administration, which approved its drug Lyrica for neuropathic pain. Nonetheless, Pfizer was down 6 cents at $26.95.

General Electric Co. added 3 cents to $36.63 after it reiterated its previous earnings forecasts for the fourth quarter and 2004. The conglomerate also said it completed a deal to sell its international capital financing division for $500 million. GE retains a 40 percent stake in the division.

Overseas, markets in Japan and Germany were closed for the holiday, while Britain and France ended their sessions early. Britain’s FTSE 100 was down 0.12 percent and France’s CAC-40 fell 0.18 percent.

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

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