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Dow, S&P Move Higher

Blue-chip stocks moved higher Friday and the broad market logged its third straight winning week, but technology stocks slid as a sales warning from data storage equipment Emulex Corp. (ELX) reminded investors the profit outlook is still cloudy.

The Dow Jones Industrial Average added 33.43 points, or 0.38 percent, at 8,745.45, according to the latest data. The broader Standard & Poor's 500 Index rose 3.18 points, or 0.35 percent, at 908.64, while the technology-laced Nasdaq Composite Index fell 10.40 points, or 0.79 percent, to 1,306.12.

For the week, the Dow rose 5.2 percent, S&P 500 was up 5.1 percent and Nasdaq climbed 4.7 percent. For the Dow and S&P 500, it was the third winning week in a row, and for the Nasdaq it was the first up week after five straight losers.

"The fundamentals haven't improved and the tech picture hasn't improved," said Frederick Sears, a fund manager at Eastern Point Advisors.

Wall Street remains wary about the outlook for profits after a slew of economic data has suggested the much-anticipated economic recovery may be on hold. Trading was quiet, in contrast to heavy trade earlier in the week on hopes that U.S. Federal Reserve will lower interest rates.

"A lot of people are taking a break from three days of gains and no one wants to buy before the weekend," said Shuji Igushi, a trader for money management firm Jurika & Voyles. "There's nothing to warrant people jumping in with both feet.'

Advancing stocks edged out decliners by a ratio of 17 to 14 on the New York Stock Exchange, but 9 stocks fell for every 7 that gained Nasdaq. Trading was quieter than in recent sessions, with 1.26 billion shares changing hands on the Big Board and about 1.31 billion traded on Nasdaq.

Stocks have gained, in part, on hopes the Federal Reserve will take another whack at interest rates to lift the economy after 11 cuts last year took rates to their current 40-year lows.

Most economists do not expect the central bank to cut as early as Tuesday's policy-setting meeting, but Morgan Stanley's chief U.S. economist bucked the trend, saying he thinks the Fed will lop off 50 basis points next week to thwart a double-dip recession, two periods of recession punctuated by a brief upturn.

"The single biggest thing that fueled this week's rally was speculation the Fed will be more aggressive, and that we could see a cut as early as Tuesday," said Phil Orlando, chief investment officer at Value Line Asset Management, which oversees $6 billion. "It is our view that expectation is inappropriate."

Emulex (ELX) kept the pressure on technology stocks, falling $8.26, or 35 percent, to $15.35, making it the biggest percentage loser on the Nasdaq. The data storage equipment maker said it expects sales to be weaker than analysts expected amid a difficult environment for business spending.

This dragged on other data storage equipment companies. QLogic Corp. (QLGC) sank $3.42, or 8.7 percent, to $35.90. Brocade Communications Systems Inc. (BRCD) took an 11 percent hit, down $1.92 to $15.36.

Worries over corporate scandals remain near the top of Wall Street's list of worries. Bankrupt telecommunications giant WorldCom Inc. (WCOM) disclosed an additional $3.3 billion in earnings errors, boosting the total disclosed in its widening accounting scandal to more than $7 billion. WorldCom lost 1.5 cents to 10.9 cents.

On a brighter note, US Laboratories Inc. (USLB) surged $4.59, or 47 percent, to $14.39 and ranked as the biggest percentage gainer on the Nasdaq. France-based Bureau Veritas S.A. said it has agreed to buy the quality-control services provider for $83 million.

Best Buy Co. Inc. (BBY) bounced up $1.71 to $21.26, scrambling up from a 40 percent loss on Thursday when the retailer cut its profit outlook for the second time in two months as consumers curtailed spending on electronics gear.

A rash of tepid reports have hinted the nation's economic recovery may be losing steam.

The productivity of U.S. workers grew in the second quarter, but at a sharply slower pace than at the beginning of the year, the Labor Department said.

"Everything is showing the (economic) numbers cooled off in July, and consumer spending isn't as hearty as it was before." said Weston Boone, a trader at Legg Mason Wood Walker.

Technicians say support -- where buyers are expected to swoop in -- is at 1,240 for the Nasdaq, 8,520 for the Dow and 885 for the S&P. Resistance -- the point where sellers are likely to emerge -- is at 1,350 for the Nasdaq, 8,900 for the Dow and 950 for the S&P, according to research firm Schaeffer's Investment Research.

The levels are key elements of technical analysis, which studies prices, volume and charts.

The Russell 2000 index, which tracks smaller company stocks, fell 1.39, or 0.4 percent, to 388.45. 

Overseas, Japan's Nikkei stock average finished Friday up 2 percent. In Europe, France's CAC-40 rose 1.8 percent, Britain's FTSE 100 gained 1.9 percent, and Germany's DAX index climbed 2.2 percent. 

Reuters and the Associated Press contributed to this report.

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