Dow Up 89 but Nasdaq Hit by Profit-Taking

The Dow industrials surged higher Friday, finishing a lackluster week above the 8,900 mark, as investors shrugged off uncertainty about interest rates and the latest U.S.-Iraq showdown.

But the Nasdaq market slumped for a third straight day amid another bout of profit-taking.

Trading was light on the New York Stock Exchange as investors grew nervous before Tuesday’s Federal Reserve Board meeting. Many market watchers expect the Fed to cut interest rates for the third time this year to further stimulate the economy, which showed signs of slowing in late summer, while others aren’t so sure.

The Dow Jones industrial average closed up 89.85 points at 8,919.59, about 56 points lower for the week. Broader stock indexes also advanced.

“Tuesday will be anticlimactic for those who have already factored in a rate cut, and if we don’t have one, it will be a big disappointment,” said Richard Cripps, chief market strategist for Legg Mason in Baltimore.

The dollar gained against the Japanese yen, rallying to 122.72 from 121.98 on Thursday, after a U.S. economic report showing a jump in October retail sales clouded the outlook for a Fed cut.

Also on the economic news, U.S. Treasury notes fell and bonds were unchanged. Yields on two-year notes, the most actively traded Treasury securities and among those most sensitive to expectations about Fed policy, rose to 4.52% from 4.46%. The yield on the benchmark 30-year T-bond held steady at 5.25%.

Some traders were concerned that if the central bank decides to leave rates alone, still-shaky financial markets might suffer.

“The market is entering a hesitation period that typically occurs before a highly anticipated Fed meeting,” said Gregory Nie, technical analyst at Everen Securities in Chicago.

The Commerce Department’s retail report, which could signal a healthy Christmas sales season, also added to worries about how the Fed will act. The government said retail sales rose 1% last month.

Analysts attributed part of Friday’s rally to the International Monetary Fund’s agreement to a $41.5-billion rescue package for Brazil. IMF officials hope the plan will reassure financial markets that Brazil will have the money to pay its debts while it puts its fiscal house in order.

The Standard & Poor’s 500 index was up 8.03 points at 1,125.72.

Declining issues outnumbered advancers by a narrow margin on the NYSE.

Among Friday’s highlights:

* The Nasdaq composite index fell in part because of a drop in prices for Dell Computer, down $5.25 to $63.94, and Yahoo, down $5.25 to $168. The composite dropped 3.07 points to 1,847.99, posting a loss of 8.57 points for the week.

* Several small Internet stocks zoomed to new highs. Most notable was Theglobe.com Inc., which set a record gain for initial public offerings. Its shares opened at $87, an 866% premium to the initial offering price of $9, then rose higher before losing ground and closing at $63.50.

* The Dow was led by General Motors, up $3.25 at $70.25. Financial stocks also rose, including Chase Manhattan, up $2.06 to $57.19, and BankAmerica, up $2.69 to $58.44.

Overseas, Japan’s Nikkei stock average rose 1.4%, Germany’s DAX index and France’s CAC-40 were unchanged and Britain’s FTSE-100 rose 0.3%.

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Market Roundup, C4