NEW YORK – Blue-chip stocks edged higher Friday after an encouraging employment report and a rosy outlook from Minnesota Mining & Manufacturing Co. (MMM), but the broad market slipped after networking gear maker McData Corp. (MCDTA) warned profits will land short of forecasts.
The Dow Jones industrial average was up for the second-straight session, rising 36.47 points, or 0.36 percent, to 10,271.64. The broader Standard & Poor's 500 Index was down 3.61 points, or 0.32 percent, at 1,122.73. The technology-laced Nasdaq Composite Index was down 19.72 points, or 1.1 percent, at 1,770.03.
For the week, the Dow fell 1.3 percent, while the Nasdaq dropped 4.1 percent. The S&P 500 gave up 2.1 percent.
Techs were hard hit after McData Corp. , which makes switches for data storage networks, became the latest high-tech firm this week to warn that profits will miss forecasts as businesses cut orders.
"3M has always been the stock that tells you where the economy is going, because it makes so many diverse products. That's the good news," said Gil Knight, fund manager for Allied Investment Advisors, which manages $11 billion. But, he said, "the tech sector is still under a real cloud and anything to do with software or information technology spending, forget it."
3M, a Dow stock, surged $7.81, or 6.84 percent, to $121.93. The maker of Post-It notes and Scotch tape said quarterly earnings will be at the high end or surpass earlier expectations after aggressive cost-cutting. The company also said it would change its name to 3M Co.
Among other Dow gainers, Alcoa Inc. (AA) tacked on a gain of $1.12 to $38. The world's No. 1 aluminum producer said earnings fell 46 percent from a year-ago as weak global demand for aluminum kept prices low. But the fact it returned to profitability was enough for investors to snatch up the stock, which has fallen 3.3 percent in the past 20 sessions.
Other manufacturers to rise included Caterpillar Inc. (CAT), up $1.95, or 3.5 percent, to $57.36.
"In times of uncertainty, investors move money into bigger companies, figuring they have the resources to weather storms better," said Howard Kornblue, managing director with ING Funds, which oversees $35 billion. "I think that's why you have this discrepancy between Dow and Nasdaq."
Tech shares took a hit after McData became the latest high-tech firm to warn results will miss expectations. The company said it would likely report a loss for the year, compared with an earlier expectation for a profit, as business spending slowed. Shares tumbled $2.88, or 23 percent, to $9.67. Sector leader EMC Corp. (EMC) lost 59 cents, or 5 percent, to $11.12. Network Appliance (NTAP) slumped $1.34 to $18.35 and Emulex Corp. (EMLX) dropped $2.12 to $30.04.
Computing giant International Business Machines (IBM), a key customer of McData and a component of the Dow average, fell 3.6 percent, or $3.59, to $97.25.
Investors will start seeing first-quarter earnings reports trickling in next week, while the onslaught will begin in earnest week after next.
Profits are expected to fall 9 percent from the same period a year ago, according to Thomson Financial/First Call. That is lower than the 8.8 percent decline forecast on March 28, after a tidal wave of technology companies warned they would miss earnings expectations.
"We've seen a lot of warnings in the tech sector and we're seeing expectations being ratcheted down again," said Marian Kessler, a fund manager who helps oversee $100 million for Rutherford Investment Management.
But some saw some relatively good news in the latest economic data from the Labor Department, which showed the jobless rate rose two-tenths of a percentage point to 5.7 percent, versus an expected 5.6 percent.
Rising unemployment could keep the Federal Reserve from raising interest rates, fund managers said.
Dallas Federal Reserve President Robert McTeer said Thursday he would not favor raising interest rates until the unemployment rate falls below 5 percent and and until factory production gets closer to full capacity.
U.S. bond prices turned positive after the numbers. Stocks rose as investors brushed aside the implications of the soft numbers for the economy and focused instead on the silver lining -- that the report eases pressure on the Federal Reserve to raise interest rates.
Interest-rate sensitive issues such as financials rose. Dow average stocks American Express added 55 cents to $40.70 and J.P. Morgan Chase rose 42 cents to $34.86.
Worries about fighting between Israelis and Palestinians continued to weigh on the stock market. Investors fear unrest could crimp oil supplies, raising prices and driving inflation.
"The Mideast is the wild card," said Kessler. "The price of oil is telling you what each day's expectations are for war in the Middle East."
NYMEX May crude oil futures fell to $26.21 a barrel, down 37 cents after President Bush said Thursday he will send Secretary of State Colin Powell to the Middle East to try to end the escalating Arab-Israeli violence.
Oil stocks retreated in lock step with a pullback in the price of oil -- a so-called "war commodity" that usually rises in times of turmoil.
The Philadelphia oil services index fell 1 percent, reflecting losses by firms such as Schlumberger Ltd. , off $1.65 to $54.39. Weighing on the Dow average, ExxonMobil Corp. lost 52 cents to $42.63.
Resistance -- the point where sellers are likely to emerge -- is at 10,300 for the Dow, 1,810 for the Nasdaq and 1,140 for the S&P, according to research firm Schaeffersresearch.com.
Support -- where buyers are expected to swoop in-- is at 10,150 for the Dow, 1,770 for the Nasdaq and 1,120 for the S&P. The levels are key elements of technical analysis, which studies prices, volume and charts to determine a potentially opportune time to buy or sell stocks.
Volume continued to be unusually light, with just 1.1 billion shares changing hands on the New York Stock Exchange, according to the latest figures, making it the third-slowest day of the year. Three stocks rose for every two stocks that fell on the Big Board. About 1.5 billion shares traded on Nasdaq, where six stocks fell for every five that rose.
The Russell 2000 index, which tracks the performance of smaller company stocks, on Friday slipped 0.61, or 0.1 percent, to 497.76. For the week, the Russell lost 8.70, or 1.7 percent.
Overseas, Japan's Nikkei stock average closed Friday down 0.4 percent. In Europe, Germany's DAX index inched up 0.1 percent, France's CAC-40 declined 0.5 percent, and Britain's FT-SE 100 rose 0.5 percent.
Reuters and the Associated Press contributed to this report.
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