Nasdaq, Russell Set Records; Dow Off 44

The Nasdaq market set its first record high in a month Friday as smaller-company stocks continued to draw money away from the blue-chip sector, which was jostled by growing worries about third-quarter corporate profits and by higher bond yields.

Meanwhile, Southeast Asian stock markets soared as some key currencies in the region appeared to stabilize.

On Wall Street the Nasdaq composite index rose 11.14 points, or 0.7%, to a record 1,635.77, topping the old high of 1,630.44 set Aug. 6.

The Dow Jones industrials, by contrast, fell 44.83 points to 7,822.41 on Friday, and remain off 5.3% from their record high of 8,259.31 reached on Aug. 6.

The Nasdaq index’s gain merely confirmed what a purer small stock index--the Russell 2,000 index--has been saying for weeks. The Russell rose 3.33 points, or 0.8%, to a record 433.04 on Friday, its 10th consecutive advance.

For the week the Nasdaq index rose 3.1%; the Dow rose 2.6%, including Tuesday’s 257-point gain.

Investors’ growing appetite for smaller stocks--and waning appetite for blue chip multinational shares--reflect in part concerns about slower earnings growth among multinational firms, given the strong dollar and the economic problems in Southeast Asia.

Those fears were compounded on Friday when brokerage Smith Barney, citing profit concerns, downgraded such multinational shares as Procter & Gamble, Colgate-Palmolive and Gillette.

“It was the predictability of the earnings stream that gave people confidence to pay what some considered excessive” prices for such stocks, said Charles White, portfolio manager at Avatar Associates. Now that that predictability is being questioned, investors are looking for other stocks, he said.

Blue chips also may have been hurt Friday by a small increase in bond yields, as the government’s report on August employment trends painted a picture of a still-healthy economy.

The yield on the 30-year Treasury bond ended at 6.63%, up from 6.60% on Thursday. The yield also was 6.60% a week ago.

There was slight commotion in markets earlier in the day, on rumors that Federal Reserve Board Chairman Alan Greenspan was planning to resign. Greenspan said the rumors were “nonsense.”

In Southeast Asia on Friday battered stock markets zoomed after Malaysia’s government removed restrictions it had placed on trading in key shares, and as currencies began to stabilize. Malaysia’s main stock index soared 12.4%, while Indonesia’s jumped 11.3%, the Philippines’ gained 1.5% and Singapore’s rose 3.2%.

“It’s a big relief that the Malaysian government realized they were wrong, that they’d lost the battle” to blame foreign investors for the countries’ woes, said Mahmoud Ghaemmaghami, analyst at Westdeutsche Landesbank.

Among Friday’s U.S. highlights:

* Among blue chips, Procter & Gamble slid $3.44 to $133, Avon Products fell $4.81 to $59.94 and Gillette was down $1.44 to $81.

* Downbeat earnings warnings clipped Boston Scientific, which sank $13.25 to $62.63, and American Standard, down $4.13 to $41.

* Smaller stocks rising included Viking Office Products, up $1.50 to $23.13; Jefferies Group, up $2.88 to $73.38; and Nextel Communications, up $2.06 to $26.94.

Market Roundup, D3