Blue Chips Rally in Thin Trading

NEW YORK – Blue-chip stocks staged a robust rally Friday, coming back from steep morning losses amid positive inflation news and thin volumes.

The Dow Jones industrial average jumped 117.69 points, or 1.14 percent, to end at 10,416.25, coming back from a 101-point slide scraped in the first hour.

The technology-heavy Nasdaq composite index fell 6.85 points to 1,956.47, marking the lowest close for the index since April 17, 2001.

The Standard & Poor's 500 index climbed 6.73 to 1,190.16.

For the week, the Dow was off 0.9 percent, Nasdaq down 5.3 percent. Year-to-date, the Dow is down 3.4 percent, and Nasdaq is 20.8 percent lower.

``A week ago, the consensus was that the Fed has just one more quarter of percentage point (of rate cuts) left, but now people feel the Fed has an open ended commitment to get the economy going,'' said Stanley Nabi, managing director at Credit Suisse Asset Management, which oversees $110 billion.

Wall Street got reassuring news about July's producer price index, a gauge of wholesale inflation. Prices paid to U.S. producers fell in July at the fastest pace in nearly eight years, led by huge declines in energy prices, the government said on Friday in a report that added fuel to the argument that inflation is under wraps.

The producer price index tumbled 0.9 percent last month after falling 0.4 percent in June, the Labor Department said. It was the biggest drop in the PPI since a 1.0 percent decline in August 1993 and was led by the largest decrease in energy prices in nearly 12 years.

Excluding the more volatile food and energy sectors, the so-called core PPI rose 0.2 percent in July after posting a 0.1 percent increase in the prior month.

The tame inflation numbers should help ease inflation concerns for the Federal Reserve as it heads into its policysetting Federal Open Market Committee meeting on August 21, economists said.

``Things look marginally better just because there's no bad news,'' said Arthur Cashin, managing director at UBS/PaineWebber. ``The market hasn't been feeling well recently, but it may be time to get up and get some orange juice.''

In the tech sector, Oracle Corp. dropped 83 cents to $15.16 and Siebel Systems Inc. tumbled $1.48 to $28.29 after Goldman Sachs cut the companies' earnings estimates, citing a possible drop in future sales as European economies lag.

The software business is ``likely continuing to worsen ... estimating results has been like catching a falling knife this year and we do not believe Street estimates yet capture the magnitude of capital spending constraints going into 2002, particularly considering anecdotal data coming out of Europe.''

Shares in US Airways, meanwhile, dropped 65 cents to $17.63 after the company said it expects wider losses in the third quarter as lower business travel and price pressure in a slower economy continues to bruise the airline industry.

Companies involved in stem-cell research slipped, paring Thursday's gains after President Bush said the federal government will provide funding for limited aspects of the science. StemCells Inc. fell $1.61 to $4.84 and Geron Corp., dropped 99 cents to $13.95.

Philip Morris Cos. Inc. gave up an early gain and fell 38 cents to $44.11. A California judge slashed a record $3 billion verdict against the company to $100 million for a fraud claim filed by a Marlboro cigarette smoker who is dying from lung cancer.

BEA Systems Inc. dropped $1.72 to $18.50 after investment bank Credit Suisse First Boston cut its target price on the stock and lowered estimates for the second half of the year, citing fallout from the U.S. and European economic slowdown.

Advancing issues outnumbered decliners 3 to 2 on the New York Stock Exchange, where consolidated volume came to 1.13 billion shares, down from the 1.34 billion in the previous session.

The Russell 2000 index was up 1.35 at 475.52. It ended the week down 11.63, or 2.4 percent.

Overseas, Japan's Nikkei stock index fell 0.2 percent. European stocks were mixed. Germany's DAX index slid 1.4 percent, Britain's FT-SE 100 rose 0.5 percent, and France's CAC-40 was down 0.9 percent.

-- Reuters and the Associated Press contributed to this report.