Stocks Maintain Slow Ascent

The Dow gains 22 points while the Nasdaq adds 9. For the week, the Dow gains 0.8%, the Nasdaq 1.3%.
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Updated from 4:01 p.m. EDT

Stocks gained in the year's lightest volume Friday, capping off another up week for the major averages on the strength of benign economic data that helped ease worries ahead of the Republican National Convention.

The

Dow Jones Industrial Average

closed up 21.60 points, or 0.21%, to 10,195.01. The

Nasdaq Composite

gained 9.17 points, or 0.49%, to 1862.09. The

S&P 500

added 2.68%, or 0.24%, to 1107.77. For the week, the Dow added 0.8%, the Nasdaq added 1.3% and the S&P 500 gained 0.9%.

Trading was the lightest of 2004, eclipsing Thursday's low-water mark. Just 875 million shares traded on the

NYSE

while 1 billion changed hands on the

Nasdaq

. Advancers led decliners 2 to 1 on the NYSE and 3 to 2 on the Nasdaq.

Oil added 8 cents to $43.18 and was a nonfactor in equity markets. Friday marked another up day for the KBW Bank Index, which has now risen 6.4% since Aug. 6 and sits at a three-month high.

Still, Friday's gain helped the Dow and S&P 500 post their third consecutive week of gains, while the Nasdaq closed higher for the second week in a row. Since its recent low close on Aug. 12, the Dow is up 380 points, or 3.9%, while the Nasdaq has added 110 points, or 6.3%, since its low close Aug. 13.

Stocks got a boost Friday when the government released its revised estimate for second-quarter GDP, which showed that the economy grew 2.8%, above the consensus estimate of 2.7% but below the original estimate of 3%. The government also reported that an inflation gauge, the price deflator, came in at 3.2%, meeting expectations.

Meanwhile, the University of Michigan consumer sentiment index for August was revised to 95.9 from 96.7 in July. The consensus forecast of economists was 94, which was also the preliminary reading in August. The two reports spooked bond investors, leaving the 10-year Treasury note down 3/32 to yield 4.22%.

"I'm happy with today's action even though volume is incredibly light," said Bill Livesey, senior market analyst at CyberTrader. "The S&P has finally taken out those August 2nd highs, which has really been a key resistance point in my mind." The index closed at 1106.62 on Aug. 2.

"All the other indicators are still positive, there's some good action in the biotechs and the drugs," he added. "The light volume really doesn't bother me that much, interest rates are still low, right at the bottom of their trading range. As long as they remain flat, things are pretty good. I think we're just having a little vacation rally."

Speaking in Wyoming, Alan Greenspan steered clear of the economy in prepared remarks to a group of central bankers. Instead, Greenspan discussed the state of the U.S. retirement system, saying Social Security and Medicare benefits might outstrip the country's ability to pay them when the baby boom generation retires.

"If we have promised more than our economy has the ability to deliver to retirees without unduly diminishing real income gains of workers, as I fear we may have, we must recalibrate our public programs so that pending retirees have time to adjust through other channels," he said.

"The GDP numbers were fine, slightly above consensus," said Subodh Kumar, chief investment strategist at CIBC World Markets. "It looks to me like a market that's stabilizing."

Kumar added that, despite the convention noise, next week's focus would remain on economic fundamentals. "In my opinion, the focus is first of all going to remain on oil prices, but the other one is the fact that the economy is in relatively good shape and therefore we should see a fairly broad group of stocks trying to recover."

As many as 500,000 people -- delegates, their families, journalists and protestors -- are expected to descend on Manhattan this weekend for the Republican convention, which begins Monday. The city has budgeted about $75 million for additional security amid concerns terrorists would like to disrupt the presidential election. Scattered and peaceful protests continued Friday, with the first major demonstrations are scheduled for Sunday and Monday nights.

Speaking generally, stock market bulls are hoping for a quiet convention in which President Bush's renomination sparks enthusiasm that carries him to a second term. Terrorism is by far the biggest concern since even violent street protest could be viewed as a positive for the incumbent. Given the economic uncertainties in the market, however,

this thesis is subject to revision, particularly ahead of the September employment report, which comes out next Friday.

In Iraq on Friday, insurgents in Najaf have vacated the shrine of Imam Ali under a peace deal brokered by ayatollah Ali Sistani and radical cleric Muqtada al-Sadr. Despite the small success, new attacks on Iraq's oil infrastructure continued.

In Russia, officials said they found traces of explosives in the wreckage of one of the two Russian Tupelov aircrafts that crashed within minutes of each other earlier this week. According to various media sources, a Web site with connections to Islamic militants has tied the two crashes to the Chechen separatists.

Among stocks,

AMR

(AMR)

could see pressure Friday after saying its 2004 operating expenses probably will be around $1 billion, up from its old estimate of $700 million, thanks to surging fuel prices. The higher fuel will raise the cost per available seat mile, a key expense metric among airlines, to 9.68 cents this year, more than 3 cents higher than

Southwest Airlines

(LUV) - Get Report

and

JetBlue

(JBLU) - Get Report

.

The semiconductor-equipment space was mostly higher Friday despite

Novellus

(NVLS)

saying last night that third-quarter orders would come in at the low end of Wall Street's range of $420 million to $440 million. The company also said it expects to earn 37 cents to 39 cents a share in the quarter on revenue of $412 million. It had previously forecast earnings of 39 cents a share on revenue of $408 million to $418 million. The shares closed up 53 cents, to $25.18.

Meanwhile, peers

Applied Materials

(AMAT) - Get Report

ended up 38 cents, or 2.38%, to $16.36, while

KLA-Tencor

(KLAC) - Get Report

finished up 70 cents, or 1.87%, to $38.20. Both were subjects of positive Wall Street research Friday morning.

Chiron

(CHIR) - Get Report

fell more than 8% after detecting problems with the production of its Fluvirin influenza virus vaccine. The biotech found "a small number" of products that failed to meet sterility specifications, a development that will prevent it from recording any third-quarter sales from the drug. Chiron said full-year earnings probably will be at the low end of its $1.80 to $1.90 range. The stock closed down $4.08 to $43.41.

Overseas markets closed mixed, with London's FTSE 100 ending up 0.81% to 4490.10 and Germany's Xetra DAX gaining 0.49% to 3851.18. In Asia, Japan's Nikkei was up 0.7% to 11,209 while Hong Kong's Hang Seng fell 0.3% to 12,818.