- The Washington Times - Tuesday, May 24, 2005

NEW YORK (AP) — Stocks finished narrowly mixed yesterday as investors took the opportunity to lock in profits and drew comfort from the Federal Reserve’s benign outlook on inflation. Technology stocks continued to rally, with the Nasdaq Composite Index posting its eighth straight gain.

Wall Street had eagerly anticipated the minutes from the Federal Reserve’s May 3 meeting, hoping for a clearer picture of the strength of the economy and the prospects for inflation. In the minutes, the Fed noted a risk of inflation as well as an economic slowdown, but said that those pressures remained in check and that interest rates could be increased slowly.

Recent economic data, however, showed an increase in prices and inflation risk, as well as increased strength in the economy. But since higher interest rates serve to moderate growth as well as stem inflation, the Fed made the right call, said Lincoln Anderson, chief investment officer at LPL Financial Services.

“The economy seems pretty strong right now, and the Fed is moving on rates at what seems to be a good pace,” Mr. Anderson said. “And that’s good for the market.”

The Dow Jones Industrial Average fell 19.88, or 0.19 percent, to 10,503.68.

Broader stock indicators edged higher. The Standard & Poor’s 500 index was up 0.21, or 0.02 percent, at 1,194.07, and the Nasdaq Composite Index gained 4.97, or 0.24 percent, to 2,061.62. The Russell 2000 index of smaller companies was up 0.08, or 0.01 percent, at 612.95.

Crude oil futures rose as investors interpreted mixed signals from the Organization of Petroleum Exporting Countries regarding crude production. A barrel of light crude settled at $49.67, up 51 cents, on the New York Mercantile Exchange.

Bonds continued their recent rally, with the yield on the 10-year Treasury note falling to 4.03 percent from 4.07 percent late Monday. The dollar was mixed against other major currencies, while gold prices fell.

In economic news, the National Association of Realtors reported a 4.5 percent increase in existing home sales, which rose to an annualized rate of 7.18 million homes in April, compared with 6.87 million in March. Analysts had expected a more modest rate of 6.9 million. Home prices rose 15.1 percent year-over-year, raising concerns that the housing market “bubble” may burst as more people are unable to afford homes.

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