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Nasdaq Slump Hits Sixth Week

Blue-chips post a tiny gain after a slew of positive earnings and a GDP surprise.
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Updated from 4:04 p.m. EST

Stocks ended flat Friday after early gains slowly slipped away with the

Nasdaq's

losing streak stretching to six weeks, despite positive economic and earnings reports.

The

Dow

closed up 3.78 points, or 0.04%, to 10,583.92; the

S&P 500

finished up 0.03 points at 1144.94; and the

Nasdaq

lost 2.75 points, or 0.14%, to 2029.82. The Dow lost ground for the second week in a row, while the S&P gained a fraction.

"The market is certainly showing you a little more weakness in recent pull-backs than it was in the past year, but it doesn't look really awful," said Ken Tower, a chief market strategist with Cybertrader, after acknowledging that the imminence of a market correction was the "million-dollar question" on everyone's mind.

"It just seems to have flattened out." Said Tower. "So, this could be the beginning of a topping out process that leads to a more significant correction, but there's still money coming into the market, and that's going to cushion whatever decline we get."

Volume on the

New York Stock Exchange

was 1.5 billion shares, and advancers beat out decliners by 2 to 1. Some 1.8 billion shares changed hands on the Nasdaq, where advancers topped decliners by 5 to 4.

In February, historically a weak month for the stock market, the Dow gained 0.9%, the S&P rose 1.2% while the Nasdaq lost 1.7%.

"There's no real reason to become a buyer or a big seller here," said Robert Pavlik, a portfolio manager at OakTree Management. "The market isn't giving us any clear indication of which way it wants to go. It's looking for the numbers from next week's employment report."

Pavlik added that he would not be surprised if the market continued to move sideways until a major news event, such as the January employment report due out next Friday, triggers a more defined trend.

"If we don't get a clear message from the employment figures, then Wall Street will be focused on the next round of earnings, which are only a month away at this point," he said. "The more we continue at this level without a major correction, I think the consolidation at these levels will give us the impetus to go forward."

Larry Wachtel, market analyst at Wachovia Securities, called the fact that the markets have climbed for a year without a major correction "unprecedented." "Stocks are still the asset class of choice," Wachtel said, but he still thinks the markets could be due for a significant correction. "I think it will be contested going forward. There's no clear-cut uptrend, and there's always the chance of a shakeout of some nature."

Overseas stocks were higher, with London's FTSE 100 up 0.7% to 4549 and Germany's Xetra DAX up 0.8% to 4042. In Asia, Japan's Nikkei closed up 2.1% to 11,042, while Hong Kong's Hang Seng rose 1.7% to 13,907.

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Among other assets, the 10-year Treasury bond was up 16/32 in price to yield 3.97%. Crude oil and gold prices climbed. The dollar held its ground against the euro on continuing speculation about an interest rate cut in Europe next week, but fell vs. the yen following solid Japanese economic data.

On Thursday, the Dow lost 21.48 points to 10,580.14; the S&P 500 added 1.24 points to 1144.92; and the Nasdaq rose 9.59 points to 2032.58.

The U.S. economy grew at an annualized rate of 4.1%, according to revised numbers from the Commerce Department, higher than the initial 4% reading, while economists had expected a downward revision to 3.8%.

Also higher than expected, the University of Michigan's Consumer Sentiment Index was revised up to 94.4 for February, compared with January's reading of 103.8. A preliminary report on February from earlier this month had the index at 93.1. Economists had predicted the number would rise to 94.

Finally, the Chicago purchasing managers index of manufacturing activity was 63.6 in February vs. 65.9 the prior month, but slightly ahead of economists' forecasts.

In corporate news,

Gap

(GPS) - Get Gap, Inc. (GPS) Report

met Wall Street's expectations for fourth-quarter earnings, reporting a 37% rise in profit late Thursday. The clothing chain said net income rose to $355.8 million, or 37 cents a share, from $248.7 million, or 27 cents a share, a year earlier. Gap shares closed 28 cents, or 1.3%, to $20.80.

Genzyme

(GENZ)

announced a $1 billion, or $26-a-share, acquisition of

Ilex Oncology

(ILXO)

late Thursday. Shares of Genzyme closed down $2.83, or 5.3%, to $40.45, while Ilex shares rose $3.63, or 17%, to $25.

Autodesk

(ADSK) - Get Autodesk, Inc. Report

shares jumped $2.79, or 10.74%, to $28.76. The San Rafael, Calif.-based company said fourth-quarter net income rose to $58 million, or 48 cents a share on a GAAP basis, compared with $6.4 million, or 6 cents a share, in the same period a year ago. On a pro forma basis, the firm earned $53 million, or 45 cents a share, vs. $8 million, or 7 cents a share, a year ago. Pro forma earnings were 16 cents ahead of expectations, and the company guided up for 2004.

A slew of economic data is due out Monday, starting with a report on personal income and spending for the month of January from the Commerce Department scheduled for 8:30 a.m. EST. Economists have predicted that personal income will rise 0.5%, beating December's rate of 0.2% growth, and spending will grow 0.3%, lower than December's 0.4% growth-rate.

Then, at 10:00 a.m. EST, the Census Bureau will release construction spending figures, which are expected to rise 0.3% compared to the 0.4% growth recorded for December/

The Institute of Supply Management will report the results of its index measuring activity in the manufacturing sector for February. Economists expect the index to shed 1.6 points to 62. While that number would be a bit lower than January's, any reading on the index above 50 signals expansion in a sector that has long been a laggard in the economic recovery.

Traders expect next week to be dominated by anticipation of Friday's employment report from the Labor Department, widely viewed as the key indicator of the long-term prospects for the U.S. economy.

No significant earnings news is expected on Monday.