Having soared in the first quarter, the stock market flew closer to the ground in the second.
It also flew closer to home as the shares of big domestic consumer com-panies pulled far ahead of those that rely on exports for profits.The closer a company was to Americans' pockets, it seems, the better its shares did. The Gap, for example, closed Thursday at 63 9/16. That's up from around 43 at the end of March, and 35 on Jan. 1.
"The average consumer is making more money and enjoying spend-ing it," said Alfred E. Goldman, vice president and market strategist at A.G. Edwards & Sons Inc. in St. Louis.
Retailers' shares, for example, managed some of the biggest increases. So did pharmaceutical companies, airlines and financial service companies.
By contrast, energy-related stocks barely flickered amid weakened oil prices. Schlumberger shares closed at 68 3/16 Thursday, down from a high of 86 in early May. Stocks tied to basic commodities such as metal, paper and chemicals turned in lackluster performances as well.
Market experts say the Asian economic crisis was responsible for both trends. It sapped demand in Asia for U.S. exports, while at the same time cheapening imports from Asia to the United States and keeping a lid on prices here.
"We've had a Far East importation of deflation," said Ned Riley, chief investment officer at Bank of Boston.
The upside to the Asian crisis is that it has enabled the Federal Reserve to forestall raising interest rates. Low rates have helped boost the stock prices and profits of financial services companies like banks, brokerages and insurers.
But the low rates also confirm a slowdown in the economy that could end up eating into profits. As a result, analysts continue to lower their estimates of second-quarter earnings, said Chuck Hill, research director at First Call Corp. in Boston.
As of Thursday morning, of the 463 companies that had put out some kind of guidance about second-quarter earnings, a record 68 percent said the news was negative, Hill said.
Last week, First Call estimated second-quarter earnings of the Standard & Poor's 500 components will be up 2.3 percent over the comparable period last year. That is down from the firm's estimate of 12.9 percent at the beginning of the year, 6.1 percent at the beginning of the second quarter, and almost 4 percent a week ago.
This past Thursday (the markets were closed Friday for Independence Day), the Dow Jones industrials fell 23.41 to 9,025.26, up 81.46 for the week. That is up 14 percent for the year but only 2.5 percent since the end of the first quarter.
The Standard & Poor's 500 index declined 2.14 Thursday to 1,146.42, but had a gain of 13.22 for the week. The S&P is up 18 percent for the year but was up less than 4 percent for the second quarter.