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Posted at 11:34 a.m., Tuesday, October 11, 2005

Strong Alcoa earnings lead Dow higher

Associated Press

NEW YORK — Stocks closed mixed today as strong earnings from Alcoa Inc. led the Dow Jones industrials slightly higher but the Nasdaq gave up early gains as rising oil prices renewed worries about inflation and recession.

Solid earnings and outlooks from a handful of companies helped the Dow, which rose after aluminum maker Alcoa reported higher profits despite rising energy costs and lower prices for aluminum. But the gains narrowed in afternoon trading as broader indexes fell and oil prices climbed.

Traders continue to look anxiously for signs that higher energy costs will depress corporate earnings and oil prices stoked that nervousness. A barrel of light crude settled at $63.53, up $1.73, in trading on the New York Mercantile Exchange.

The markets' behavior is typical of an aging bull market, and this bull market, now in its fourth year, is aging, said Charles H. Blood Jr., senior financial markets analyst at Brown Brothers Harriman & Co.

"Things are just more erratic, they take longer, they're not as decisive," he said.

The Dow rose 14.41, or 0.14 percent, to 10,253.17. The Dow lost 276.36 points, or 2.62 percent, last week, and fell another 53 points yesterday.

Broader stock indicators were slightly lower. The Standard & Poor's 500 index fell 2.46, or 0.21 percent, to 1,184.87, and the Nasdaq composite index fell 17.83, or 0.86 percent, to 2,061.09.

Bonds also fell, with the yield on the 10-year Treasury note at 4.39 percent, up from 4.37 percent late Friday. The Treasuries market was closed yesterday for the Columbus Day holiday. The U.S. dollar was mixed against other major currencies in European trading. Gold prices were higher.

"We have decent economic growth, but the Fed's tightening," Blood said. "Earnings should be good, but rising interest rates are putting a little bit of pressure on valuation. All that nets out to a higher market, but not every day and every week."

Investors got another signal that the Federal Reserve's tightening of short-term interest rates to stave off inflation would continue. In minutes released from its Sept. 20 closed-door discussions, Fed officials said they felt the need to keep boosting interest rates in September partly out of concern that a pause might mislead people into thinking the Fed was too worried about the economic impact of Hurricane Katrina.

"A pause in policy tightening at this meeting had the potential to mislead the public both about the committee's perceptions of the fundamental strength and resilience of the economy and about its commitment to fostering price stability," the minutes stated.

The minutes also said the economy might get a lift in 2006 as the Gulf Coast continues to rebuild after Hurricanes Katrina and Rita.

In company news, cancer drug maker Genentech Inc. rose $3.09 to $84.59 after its third-quarter profits soared 56 percent. Revenue rose 46 percent to $1.75 billion from $1.2 billion in the same third quarter last year, mostly on torrid sales of its drug Avastin, which chokes the blood supply that feeds tumors.

NCR Corp. rose $1.29 to $32.24 after it raised its third-quarter and fiscal 2005 earnings outlook. The company, which makes cash registers, ATMs and computer systems, was helped by a one-time gain and said its revenue and cost savings were better than expected.

Alcoa rose 19 cents to $22.85 after it said its profits, released after the close of trading yesterday, were 2 percent higher than a year ago, despite surging energy costs and lower aluminum prices. The company saw additional income in the fiscal third quarter after selling some railroad assets and has also been eliminating jobs to offset rising costs.

RealNetworks Inc. rose $1.96 to $7.70 after it settled an antitrust lawsuit against its longtime adversary Microsoft Corp. RealNetworks said it had reached three deals with Microsoft worth $761 million, including a $301 million cash payment and the establishment of music and games partnerships designed to help RealNetworks products reach a wider audience. Microsoft fell 5 cents to $24.41.

The New York Stock Exchange suspended trading in Delphi Corp. stocks and bonds today, three days after the auto parts maker declared bankruptcy, due to "abnormally low" trading levels of its stock. The Big Board's move was the result of a review sparked by Delphi's Chapter 11 filing, announced Saturday. Its stock last traded on the New York Stock Exchange at 36 cents a share, up 3 cents. The company said it will trade on the over-the-counter electronic bulletin board known as the Pink Sheets.

Declining issues led advancers by 5 to 3 on the New York Stock Exchange, where preliminary consolidated volume of 2.29 billion shares topped the 2.21 billion traded yesterday.

The Russell 2000 index of smaller companies fell 7.89, or 1.24 percent, to 630.08.

Overseas, Japan's Nikkei stock average had a stellar day, rising 2.49 percent. Japan's lower house of parliament approved privatization of the country's $3 trillion postal system, paving way to create world's biggest bank. The nation's postal service also handles insurance and savings deposits.

Britain's FTSE 100 rose 0.12 percent, Germany's DAX index rose 0.19 percent, and France's CAC-40 gained 0.30 percent.