updated 7/5/2005 10:24:06 AM ET 2005-07-05T14:24:06

Wall Street finished a lackluster session with modest gains Friday, as stronger-than-expected economic data helped investors rebound slightly from their disappointment with the Federal Reserve’s latest policy statement. The market’s major stock indexes finished the week slightly higher.

Major Market Indices

Wall Street started the third quarter quietly, as many traders left for the long holiday weekend. Stocks had dropped sharply Thursday as the Fed gave no indication it would stop its steady, gradual interest rate hikes. The central bank also raised the nation’s benchmark rate by a quarter-percentage point to 3.25 percent on Thursday.

But some analysts felt the sell-off, which slashed nearly 100 points from the Dow Jones industrials, was overdone, and bargain hunters lifted stocks Friday despite another surge in crude oil prices . Strong manufacturing data and a bullish consumer confidence report helped the major indexes stay positive.

“Clearly cooler heads are prevailing today,” said Joseph Keating, chief investment officer at AmSouth Asset Management. “We’re seeing a far more rational response to the Fed, and yesterday’s sell-off is making for a pretty good buying opportunity.”

The Dow Jones industrial average finished the day up 28.47 points, or 0.3 percent, while the broader Standard & Poor’s 500-stock index was up 3.11 points, or 0.3 percent. The technology-loaded Nasdaq composite index added a fraction of a point.

Stocks swung higher in a volatile week as oil prices fell, then dropped after the Fed’s rate announcement and, finally, ended the week nearly unchanged. For the week, the Dow gained 0.1 percent, the S&P rose 0.2 percent and the Nasdaq climbed 0.2 percent.

Oil prices soared Friday as investors locked in their positions before the long weekend, though prices remained far below Monday’s record-setting levels. A barrel of light crude settled at $58.75, up $2.25 on the New York Mercantile Exchange.

Investors were encouraged by another sign of consumer optimism. The University of Michigan’s closely watched consumer sentiment index rose to 96 in June, better than the 94.6 reading Wall Street expected and up from 94.8 in May.

In addition, the Institute for Supply Management’s manufacturing index was stronger than expected. The ISM index for June came in at 53.8, far better than the 51.5 reading economists had forecast and up from a reading of 51.4 in May. Any reading above 50 on the ISM index represents an expansion in economic activity.

The positive reports helped investors look past a drop in construction spending, which fell 0.9 percent in May — the third straight month of declines.

“The data here is OK, but I still think you have investors who are too jittery to push this thing higher right now,” said Bill Groenveld, head trader at vFinance Investments. “I think we’re in for a jittery summer, really, with lots of volatility on light volume.”

In corporate news, Pfizer Inc. said it would drop development of two drugs, an HIV treatment and an asthma drug, after clinical trials showed the prototypes did not show enough improvements in patients. Pfizer lost 48 cents to $27.10, while German drug maker Altana AG, which had partnered with Pfizer on the asthma drug, slid 16.3 percent, or $9.32, to $48.05.

The nation’s automakers announced their June sales figures. Ford Motor Co. climbed 7 cents to $10.31 as it posted a 1 percent increase in sales, while DaimlerChrysler AG slipped 3 cents to $40.48 after announcing a 1 percent increase in sales, less than Wall Street expected.

General Motors Corp. rose 65 cents to $34.65 as it reported a 41 percent jump in sales thanks to its offer of employee discounts for all car buyers.

3M Co. rose 70 cents to $73 after saying it would take a tax-related charge in the second quarter as it reinvests $1.7 billion of foreign earnings back in the United States.

Weaker-than-expected home video sales of “The Incredibles” prompted Pixar Animation Studios to lower its quarterly earnings forecasts, although the movie is still expected to rake in $450 million in sales for the quarter. Pixar tumbled 14 percent, or $6.99, to $43.06.

Overseas, Japan’s Nikkei average rose 0.4 percent. In Europe, Britain’s FTSE 100 closed up 0.9 percent, France’s CAC-40 climbed 1 percent and Germany’s DAX index gained 0.7 percent.

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