NEW YORK – Technology stocks rose for the third straight session Friday as investors welcomed revenue increases at Microsoft (MSFT) and Xerox (XRX), but jitters about higher interest rates kept the Dow and the broad Standard & Poor's 500 indexes flat.
The technology-focused Nasdaq Composite Index (search) rose 16.86 points, or 0.83 percent, to 2,049.77. The Dow Jones industrial average (search) ended up 11.64 points, or 0.11 percent, at 10,472.84, based on the latest figures. The Standard & Poor's 500 Index (search) closed up 0.67 of a point, or 0.06 percent, at 1,140.60.
For the week, the blue-chip Dow average gained 0.19 percent, while the S&P 500 finished up 0.53 percent. The Nasdaq climbed 2.71 percent.
Declining issues had a 2-to-1 lead over advancers on the New York Stock Exchange as a surge in durable goods orders renewed worries that rates would head higher.
Blue chip stocks were lower for much of the day Friday as a report of strong durable goods orders in March fanned fears that the economy may be bouncing back fast enough for the Federal Reserve (search) to begin raising rates from 45-year lows.
The Commerce Department (search) said orders for manufactured goods rose by a robust 3.4 percent last month. The increase followed an even better 3.8 percent rise in February and surpassed the 0.7 percent rise expected by economists.
"We're in a transition phase with this market," said Stuart Freeman, chief equity strategist for A.G. Edwards & Sons. "For the first year of recovery, good news has been nothing but good news because investors weren't worried about the Fed raising rates. But when we get news like today ... it causes worry about when the Fed will come in to raise rates and by how much."
Investors have been skittish about higher rates for the past two weeks, particularly after Federal Reserve Chairman Alan Greenspan (search) gave two days of testimony in Congress this week that markets took to be a signal that interest rates could rise.
Other signs of economic strength such as jobs growth and higher consumer prices reinforced the concerns about higher rates, which could hurt stocks as well as bonds.
"I think the market's adjusting to the fact that the economy is gathering so much momentum. The question now is, will there by a shortage of labor?" said Kevin Gaughan, portfolio manager and equity strategist at Strong Financial Corp. in Milwaukee. "That's a sea change. Being an anticipatory creature, the market is looking ahead to the next issue."
The market had appeared to move past those concerns on Thursday, when several strong earnings reports led investors to plow money back into the stock market.
Tech stocks advanced Friday after Microsoft reported a big gain in revenues after the market close on Thursday.
Microsoft jumped $1.57 to $27.52 after the software giant posted a massive 17 percent gain in revenues last quarter and beat analysts' expectations for earnings growth.
Xerox Corp. posted better-than-expected quarterly earnings on strong sales of copiers and printers, but pressure on profit margins sent the document management company's shares down more than 8.5 percent to $13.18.
However, Amazon.com (AMZN) $2.57 to $46.29 despite posting a 41 percent increase in revenues and beating profit expectations in its latest quarter as investors worried whether the Internet retailer was discounting its products too much.
Caterpillar (CAT) was the biggest drag on the Dow, falling $2.14, or 2.5 percent, to $81.96. The drop comes after sharp gains on Thursday when the construction and mining equipment maker tripled earnings and raised its profit outlook.
Insurance brokers were badly hit on news that New York Attorney General Eliot Spitzer (search), whose investigations of the mutual fund and stock research businesses led to industrywide reforms, is now investigating fees earned by brokers.
Marsh & McLennan Cos. (MMC), the world's largest broker, fell 98 cents, or almost 2 percent, to $45.01. Aon Corp. (AOC), the world's No. 2 insurance broker, lost 94 cents, or 3 percent, to $27.82.
In other earnings news, Corning Inc.'s (GLW) shares surged 18 percent a day after the world's largest maker of fiber-optic cable reported stronger-than-expected financial results and offered a rosy outlook for the current quarter.
Fortune Brands Inc. (FO) said quarterly profit rose 40 percent on strong gains in all its business lines. Shares of Fortune Brands were up $2.05, or nearly 3 percent, to $78.70. The stock had risen as high as $80.50 earlier in the day.
International Paper Co. (IP), the world's largest forest products company, ticked up 0.4 percent after it said its first-quarter earnings rose 66 percent on higher sales volumes in some paper and packaging grades.
The Russell 2000 index fell 2.53 or 0.4 percent to 590.71.
Overseas, Japan's Nikkei stock average rose 1.2 percent. Britain's FTSE 100 was down 0.04 percent, Germany's DAX index was up 1.1 percent, and France's CAC-40 was up 0.7 percent.
Reuters and the Associated Press contributed to this report.
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