Stocks gained ground this week, but fears about the economy reasserted themselves and cut short a midweek rally that had been fueled by peace overtures in the Mideast.
The Dow Jones industrial average lost 12.38 Friday to end the week at 2590.10. It rose 30.45 for the week, or 1.19 percent.Among broader market indexes, Standard & Poor's 500-stock index rose 5.53 to end the week at 327.75 and the New York Stock Exchange composite index added 3.01 to end the week at 179.07.
Advances led declines 1,285-656 among the 2,182 NYSE issues traded this week. Weekly Big Board volume totaled 990,005,470 shares, compared with 757,693,840 a week earlier and 757,800,300 shares a year ago.
The market seesawed this week, gaining Monday, Tuesday and Wednesday, closing mixed Thursday and closing lower Friday.
After an uneventful Monday, dovish signals from the Mideast sustained the market's rally Tuesday and Wednesday.
Prices gained Tuesday thanks to a British television report that Iraq has outlined a proposal for withdrawal from Kuwait, even though the State Department said it knew nothing about the report.
Stocks rallied Wednesday in heavy trading as optimism grew that the Persian Gulf crisis would be solved diplomatically. The State Department announced that Iraq had accepted President Bush's offer to hold talks on the Mideast crisis. The Dow surged 30 points to close above the 2600 level for the first time since Sept. 12.
The most dramatic news from the Mideast came Thursday, when Iraqi leader Saddam Hussein said he would release all foreign hostages being held by Baghdad. While the Dow bolted 30 points on the opening, the advance faded and the blue-chip average turned lower by the afternoon when IBM's stock tumbled.
Big Blue was done in by market rumors that the company had been guiding analysts' earnings estimates lower. The company denied the rumors but to no avail. Sentiment shifted from optimism about the Mideast to fear about how company earnings would fare in the faltering economy.
The government's report on November employment Friday only served to add to the nervousness. Stocks closed lower Friday, despite an interest rate cut by the Federal Reserve and a prime rate cut by a few small banks, after the government reported a rise of 0.2 percent in the jobless rate and an unexpectedly steep drop in the number of non-farm jobs.
"Even though we were up this week, its a little disturbing because I don't believe we could have had better news than the peace offensive - the offer to exchange negotiators and the offer to release the hostages, " said Hugh Johnson, chief economist at First Albany Corp. in Albany, N.Y.
"It's clear that we're headed toward a peaceful resolution in the Mideast and that's been a real dark cloud over the market for a long time," he continued. "Now despite the fact that we've removed the ominous dark cloud, the market has not sustained its up move from earlier in the week and that means the focus has shifted back to the economy."
Johnson said the forces this week that helped bring about that shift were a weak purchasing managers' survey, the gloomy report on car sales for the latest 10-day period and last but certainly not least, the job figures Friday.
"It's very disappointing that the market isn't responding to good news," Johnson said, referring not only to the Mideast news but the cut in short-term rates this week.