S&P; Posts Highest Close in 4 Years

A key barometer of blue-chip stocks closed at a four-year high Thursday, but much of the market failed to go along for the ride -- raising concerns that Wall Street’s 12-week-old rally may be running out of gas.

The Standard & Poor’s 500 index edged up 3.21 points, or 0.3%, to 1,226.50, its best level since it ended at 1,234.45 on July 3, 2001.

The multiyear high for the S&P; was reached with a whimper rather than a roar, however: More stocks fell than rose on the New York Stock Exchange and on Nasdaq, and indexes of smaller shares continued to pull back from the record highs reached in recent days.

The market’s mixed performance -- despite upbeat news on inflation and a sharp drop in oil prices -- disappointed analysts who had been hoping to see the latest rally build momentum that could draw in skeptical investors.

Even though it’s at a four-year high, the S&P; 500 is up just 1.2% year to date. It crossed the 1,225 mark on March 7, then slumped through mid-April on worries that the economy was slowing.

The Dow Jones industrial average, made up of 30 blue-chip issues, also has struggled to stay in the black this year. The Dow rallied 71.50 points, or 0.7%, to 10,628.89 on Thursday, but still is down 1.4% since Dec. 31.

The market rally that began in late April has been led by small and mid-sized stocks, continuing a trend that has dominated Wall Street for the last five years.

The Russell 2,000 index of smaller shares is up 15.3% from its 2005 low reached in April, nearly double the gain of the S&P; 500 from its low that month.

But the Russell index lost 4.63 points, or 0.7%, to 663.02 Thursday, its third straight decline after reaching an all-time high on Monday.

Some analysts fear that, just as blue-chip shares begin to grab headlines, the market overall could be cresting. That’s what happened in early March.

“Frequently, when a leading index starts to drag, it is a sign of an inflection point,” said Steve Todd, editor of the Todd Market Forecast newsletter in Mission Viejo, referring to the Russell index.

Still, Todd said he believed that if the market was headed for a pullback, any decline was “likely to be short term in nature.”

Marc Pado, a strategist for New York-based brokerage Cantor Fitzgerald, also said he thought stocks had more to gain this summer. Second-quarter earnings reports are likely to be better than anticipated, he said, fueling more optimism about the economy.

“We’re not entering a soft patch [in the economy]. We’re coming out of one,” Pado said.

Profit reports on Thursday were mixed. Biotech firm Genzyme surged $3.97 to $65.30 after it said second-quarter earnings rose 58%. Southwest Airlines rallied 44 cents to $14.42 on its report that quarterly results rose 41%.

But hotel chain Marriott International slid $2.50 to $67.90. It reported a decline in net income after taking a one-time charge related to an acquisition.

Overall, falling stocks outnumbered winners by about 6 to 5 on the NYSE and on Nasdaq.

Wall Street didn’t find much inspiration in the government’s report that the consumer price index was unchanged in June. The bond market also wasn’t impressed: Long-term Treasury bond yields inched up for a fifth session.

The bellwether 10-year T-note yield rose to 4.18%, its highest level in nine weeks, from 4.16% on Wednesday. Bond yields rise as their prices decline.

The recent uptick in long-term yields could restrain the stock market, some analysts say. But others see the increase in rates as a sign that more investors are trading bonds for stocks, on the belief that the economy is getting better.

At Thursday’s four-year high, the S&P; 500 is up 58% from its bear market low reached on Oct. 9, 2002. But the index remains nearly 20% below its all-time high reached in March 2000. Those figures don’t include dividends earned.

Among the day’s market highlights:

* The technology sector continued to be a bright spot in the latest rally. The Nasdaq composite climbed 8.71 points, or 0.4%, to 2,152.82, its highest close since Dec. 31. Although the index still is down 1% year to date, it has jumped 13.1% from its 2005 low in April, outpacing the S&P; and the Dow.

Apple Computer soared $2.40 to $40.75 after the company late Wednesday reported sharply higher quarterly earnings. Chip maker Advanced Micro Devices gained 63 cents to $19.88, also responding to better-than-expected earnings.

* Crude oil prices slumped on expectations that Hurricane Emily wouldn’t threaten Gulf of Mexico oil and gas drilling rigs. Near-term oil futures in New York fell $2.21 to $57.80 a barrel.

Energy stocks dropped with oil prices. Exxon Mobil lost $1.17 to $58.59; Marathon Oil was down $1.99 to $55.68.

* Airline stocks rallied as Southwest posted higher profit and major carriers raised fares to cope with fuel costs. AMR, the parent of American Airlines, shot up $1.08 to $13.87. Jet Blue jumped 76 cents to $21.98.

* GM led industrial blue chips higher. The shares rose $1.13 to $37, their highest since February. Among other industrial issues, Caterpillar rose $1.08 to $51 and Cummins jumped $2.33 to $78.98.

* Major European market indexes closed at multiyear highs, continuing a rally interrupted briefly last week by the transit bombings in London. Britain’s FTSE-100 index gained 0.3% to 5,259.70, its highest close since 2002. German’s DAX index rallied 0.4% to 4,699.27, also the highest since 2002.

* In Asian trading, Hong Kong’s Hang Seng index rose 1.3% to 14,491.54, its highest close since 2001.