Stocks closed mixed as a slight surge in Internet-related stocks drove the Nasdaq composite index to a new record. But blue-chip stocks fell on profit-taking and conflicting inflationary news.
The Dow Jones industrial average closed down 81.35 at 10,648.51 after gaining more than 400 points in the last three sessions of last week. "You'd expect some profit-taking after last week's fireworks," said Hugh Johnson, chief investment strategist at First Albany Corp.
Meanwhile, the Nasdaq composite index rose 1.22 to a new closing high of 2967.65. The Standard & Poor's 500 fell 8.81, to 1354.12.
Mixed signals on inflation had the market moving in different directions throughout today's session.
The Nasdaq surged toward the psychological benchmark of 3000 early on but then settled back toward its starting point after the National Association of Purchasing Management said in its monthly report on the economy that manufacturing growth had slowed in October but that prices for raw materials reached a four-year high.
The market uses the raw-material price index to gauge whether consumer prices are on the rise. If manufacturers are paying higher prices to their vendors for raw materials, the costs are likely to be passed along to consumers, causing inflation to accelerate.
But economists said the price increases for raw materials were attributed mostly to a rise in oil prices and not considered a wide statement on the direction of consumer prices. Consequently, the report gave investors few clear signals about whether inflation is gaining momentum.
The stock market has seesawed in recent weeks as economists and investors have tried to guess what action Federal Reserve policymakers will take on interest rates at their next meeting, Nov. 16. The Fed has raised rates twice this year in an effort to slow the economy and nip rising inflation in the bud.
Analysts said traders were also trying to determine what impact the addition of four new components in the Dow--Microsoft, Intel, SBC Communications and Home Depot--are having on the blue-chip index.
Much like the broader market, the new Dow components had a mixed session. SBC rose 2 1/8, to 53, and Home Depot was up 1/2 at 76 1/4, while Microsoft fell 3/16, to 92 3/8, and Intel dropped 1-7/16, to 76.
The Nasdaq was led by software giant Oracle Corp., which rose 3-9/16, to 51 1/8, and handful of other software-related Internet stocks.