Uneven Day Caps A Solid Week

Stocks soared early yesterday but gradually gave up most of their gains as some negative news tempered the expectations of investors.

Although all three major stock indexes were down in November, the Dow Jones industrial average and the Standard & Poors 500-stock index have advanced for four consecutive sessions — the Dow gained more than 600 points — mostly on the anticipation of additional interest rate cuts by the Federal Reserve.

Personal spending and income rose less than expected in October, offering additional evidence of an economic slowdown, the Commerce Department reported yesterday. The data served to reinforce expectations that the Feds policy-making board would cut interest rates when it meets later this month.

Technology stocks fell after Dell warned that demand might be slowing. But shares of many financial companies rose on reports that the government and lenders were discussing a plan to freeze interest rates on some subprime mortgages, a move that could stem problems in the credit and housing markets.

Shares in Countrywide Financial, a major lender, rose $1.52, to $10.82, while Wells Fargo rose $1.89, to $32.43.

The Dow Jones industrial average, up more than 150 points early in the session, dropped to negative territory shortly after 3 p.m., then recovered to finish at 13,371.72, up 59.99 points, or 0.45 percent. The broader Standard & Poors 500-stock index rose 0.78 percent, while the technology-heavy Nasdaq composite index fell 0.27 percent.

There isnt a tone of desperation in this market now, said Quincy Krosby, chief investment strategist at the Hartford financial firm.

After threatening to break the $100 barrier last week, crude oil prices fell again yesterday, for their biggest weekly drop since April 2005. Oil prices in New York trading fell $2.30, to $88.71.

While the Dows morning rally fizzled, Ms. Krosby suggested that in a volatile environment, even a modest upswing was something to cheer. To get a sideways pattern in the market has a calming effect, she said.

Still, a heartening week for investors was tempered by indications that the broader economy was beginning to feel the effects of high oil prices and tightened lending standards.

Consumer spending edged up a smaller-than-expected 0.2 percent in October while personal income grew at a 0.2 percent annual rate, below the 0.4 percent reading in September, according to the Commerce Department.

The consumer definitely was a bit winded in October, said Stuart G. Hoffman, chief economist at PNC Financial.

Economists have warned for weeks that rising energy costs would put pressure on consumers pocketbooks.

Prices rose more than expected in October, a sign that inflation could be starting to tick up. A closely watched gauge, the personal consumption expenditures deflator, rose 2.9 percent last month, up from 2.4 percent in September.

Core prices, which exclude food and energy costs, stayed steady at an annual rate of 1.9 percent, slightly faster than analysts had predicted.

Spending by construction companies declined more than expected in October, and business activity in the Chicago area — considered a bellwether for broader industry — stayed at a middling level.

But investors took the gloomy data in stride — in fact, the news may have pushed stocks higher. Signs of a slowdown could underscore the need for a new interest rate cut, which many investors believe is necessary to avoid a recession.

In some weird, perverted, only Wall Street sense, even the bad news is good, said James Paulsen, chief investment strategist at Wells Capital Management.

Markets rallied at the opening bell as investors reacted to a speech on Thursday by Ben S. Bernanke, the Fed chairman, who said that a fresh wave of investor concern had led to tougher credit conditions that posed new risks to the economy, a sign that the central bank is seriously considering lowering its benchmark interest rate when it meets on Dec. 11.

Mr. Bernanke said that investors had been unnerved by losses and write-downs on home loans and that a new round of turbulence in financial markets had reversed some of the recovery in credit markets after a panic broke out in August over subprime mortgages.

Needless to say, the Federal Reserve is following the evolution of financial conditions carefully, with particular attention to the question of how strains in financial markets might affect the broader economy, he said.

Mr. Bernankes comments came on the heels of remarks by Donald L. Kohn, the Feds vice chairman, who pledged that the bank would be flexible and pragmatic. Fed officials foresee growth next year of 1.8 percent to 2.5 percent.

Interest rates were steady yesterday with the benchmark 10-year Treasury note falling 1/32, to 102 17/32, and the yield, which moves in the opposite direction from the price, at 3.94 percent, up from 3.93 percent late Thursday.

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