NEW YORK — Wall Street ended a year of solid gains with a blip lower Friday as investors made last-minute adjustments to portfolios in light holiday trading. But despite its uninspiring finish, the market was expected to extend its 2-month-old rally into the new year.
With no new economic data and little corporate news, stocks drifted in a narrow range before dipping lower at the end of the session.
Wall Street's latest rally — moving from 2004 lows in October to 3 1/2-year highs over the past two weeks — salvaged investors' returns for the year. Although the gains paled in comparison to 2003's double-digit returns, the post-election rally did push the Standard & Poor's 500 and the Nasdaq composite index to high single-digit returns.
"When you look at it, it's astounding to get the kind of performance we had this year when you think about the negative effects of the bubble bursting from the '90s, the various corporate shenanigans we had, the rise in energy prices," said Joseph Battipaglia, chief investment officer at Ryan Beck & Co. "The year's been very consistent with what we've seen in the second year of an economic recovery, and the growth we've seen is pretty good, all things considered."
On Friday, the Dow Jones industrial average fell 17.29, or 0.16 percent, to 10,783.01.
Broader stock indicators were modestly lower. The S&P 500 index was down 1.63, or 0.13 percent, at 1,211.92, and the Nasdaq lost 2.90, or 0.13 percent, to 2,175.44.
Stocks ended the week mixed in light, uneven trading, but remaining near their 3 1/2-year highs. For the week, the Dow fell 0.41 percent, while the S&P rose 0.15 percent and the Nasdaq climbed 0.69 percent.
The market entered 2004 riding a strong wave from the previous year, which saw the Dow rise 25.3 percent and the Nasdaq skyrocket 50 percent. But a midyear economic slowdown pushed stocks lower, and the slump was exacerbated by sharply rising oil prices in the third quarter. On Oct. 25, the Dow reached its low for the year at 9,749.99 before the post-election rally took hold.
For the year, the Dow gained 3.15 percent, the S&P rose 8.99 percent and the Nasdaq was up 8.59 percent. Those returns, though modest by the standards of 2003 and the dot-com bubble, are more representative of a typical bull market year. Furthermore, the gains show that the market continues its recovery from its October 2002 bear market lows, when the Dow fell to 7,286.27, the S&P 500 was at 776.76 and the Nasdaq dropped to 1,114.11.
The year's gains were fueled by a strong fourth quarter, which saw the Dow climb 6.97 percent, the S&P rise 8.73 percent and the Nasdaq gain 14.69 percent.
The 2004 returns were even more welcome considering the sharp rise in crude oil prices, which topped $55 per barrel in October before falling through November and December. Crude futures closed Thursday at $43.45 per barrel, down 19 cents, on the New York Mercantile Exchange, which was closed Friday.
For the year ahead, economic growth will likely continue at a calmer pace, while the falling dollar, which does raise long-term concerns regarding inflation, could actually help decrease the nation's trade deficit, boosting manufacturing stocks.
"I think the key issue is going to be, has the dollar fallen enough to generate trade improvement?" William Dudley, chief U.S. economist for Goldman Sachs, told Associated Press Television News. "If the answer is no, that could mean that the economy will be a little bit softer, and the dollar will probably weaken a little bit further. If the answer is yes, then the economy will be stronger."
Pharmaceutical stocks were one of the few areas of focus Friday. According to media reports, Eli Lilly & Co. hid reports that its popular antidepressant Prozac could cause behavioral problems. Eli Lilly dropped 75 cents to $56.75 on the news.
Embattled drugmaker Pfizer Inc. received good news from the U.S. Food and Drug Administration, which approved its drug Lyrica for neuropathic pain. Nonetheless, Pfizer was down 12 cents at $26.89.
General Electric Co. slipped 10 cents to $36.50 after it reiterated its previous earnings forecasts for the fourth quarter and 2004. The conglomerate also said it completed a deal to sell its international capital financing division for $500 million. GE retains a 40 percent stake in the division.