NEW YORK -- U.S. stocks closed mixed yesterday, as optimism over a report showing inflation at a 30-year low gave way to concern that corporate earnings growth will suffer as the economy weakens.
Banks, brokerages and insurance shares soared as the inflation report spurred a bond-market rally. Consumer products makers like tobacco, drug and food, whose profits are perceived as stable, also benefited.
Conversely, cyclical stocks like metal, paper and chemical producers, which rise and fall along with the economy, plummeted. Gold shares also fell as demand for an inflation hedge subsided.
"The theme of the day is the economy is slowing down," said Todd Clark, managing director in equity trading at Mabon Securities Corp.
That concern blunted an initial rally in stocks, even as Walt Disney Co. and McDonald's Inc. shares soared to record highs on surprisingly strong fourth-quarter profits.
The Dow Jones industrial average closed down 12.45, at 3,857.99, and was down 11.44 points for the week. It rose initially as much as 16.15, then fell as much as 21.87. The Standard & Poor's 500 index closed up 2.07, at 470.39, after rising as much as 3.04. The Nasdaq composite index rose 1.35, to 758.91.
Advancing common stocks beat decliners by 4-to-3 on the New York Stock Exchange. The margin of rising stocks to declining ones was as wide as 3-to-1 earlier yesterday. Trading was brisk, topping 339 million shares on the Big Board, compared with a three-month daily average of 308 million.
Stocks opened higher after the Commerce Department said economic growth in 1994 was the strongest in a decade, while inflation was the lowest in three decades.
That sent the yield on the benchmark 30-year Treasury bond tumbling to 7.73 percent, down 11 basis points from yesterday. The rally, in turn, boosted financial shares.
"As long as the perception holds that inflation is under control, the market's going to be hopeful," said Barry Berman, head trader at Robert W. Baird & Associates Inc.
Makers of consumer products, drugs, beverages and food also ranked among the biggest gainers yesterday. Philip Morris Cos., Procter & Gamble Co. and Coca-Cola Co., all three of which recently reported stronger-than-expected fourth-quarter earnings, were among the biggest gainers in the Dow industrials.
Amid expectations of a slacker economy, the Dow industrials were dragged down by its cyclical components. Aluminum Co. of America tumbled $3.50, to $81; International Paper Co. slid $2.25, to $73.25.