Nasdaq Rises to New High; Blue Chips Dip

Blue-chip stocks snapped their record-breaking streak Thursday with a mild sell-off, while smaller stocks continued to advance ahead of a key economic report today.

Elsewhere, bond yields edged lower and the dollar rose.

The Dow Jones industrials lost 32.28 points to 8,222.61 after rising as high as 8,282 in the morning.

But the broad market was higher, with winners topping losers by 17 to 12 on the New York Stock Exchange and by 22 to 19 on Nasdaq.

Most key stock indexes rose. The Nasdaq composite gained 5.76 points to a record 1,593.81.

Investors seemed generally cheered with the second-quarter gross domestic product report Thursday, which showed that the economy’s pace slowed in the quarter, as expected.

Moreover, an important measure of inflation within the GDP report showed that prices rose in the quarter at the slowest pace since 1964. (Story, A1.)

Even with weaker economic growth, second-quarter corporate profits generally have been as good or better than expected, analysts note. With low inflation potentially removing any threat of a Federal Reserve Board interest-rate hike any time soon, “Stocks are going to continue to do well,” said Richard Jandrain, equity chief at Banc One Investment Advisors.

Indeed, the bond market on Thursday again endorsed the idea of a steady Fed, as the yield on the bellwether 30-year Treasury bond fell to a new 18-month low of 6.30% from 6.32% on Wednesday.

“It’s more of the same story--growth is fine and inflation is excellent,” leaving room for more gains in bonds, said Barry Evans, who manages $2 billion of bonds at John Hancock Funds.

Today, however, the government will report on July employment trends. A stronger-than-expected report could conceivably send yields surging if investors fear the economy is heating up.

But most economists don’t expect today’s numbers to be too robust. It’s expected that 193,000 new jobs were created in July, compared with 217,000 in June.

Given the continuing low inflation data, many analysts believe that even with an economic pickup, the Fed would be under no pressure to raise rates.

Among Thursday’s highlights:

* Financial-services shares led the broad market higher. BankBoston rose $2.63 to $84.94, Fannie Mae gained $1.13 to $47.25 and Washington Mutual jumped $2.75 to $69.13.

Brokerage stocks also soared, led by Merrill Lynch, up $2.38 to $70.44, and Salomon, up $4.06 to $64. (Investor Spotlight, D7.)

* Technology stocks boosting the Nasdaq market included Intel, up $2.44 to a record $91.81; Dell Computer, up $3.25 to $85.50; and BMC Software, up $1.75 to $60.25.

* Smaller Southland stocks attracting buyers included Viking Office Products, up $1.31 to $20.06; restaurant chain Sizzler, up 56 cents to $4.66; clothing maker Quiksilver, up $1.13 to $37; and pump maker Haskel International, up $1.25 to $13.13 after reporting higher quarterly operating earnings.

* The Dow was dragged down by stocks of companies that often don’t do well when the economy slows, including Caterpillar, down $3.50 to $56, and Goodyear, down $1.44 to $64.69.

Also, Eastman Kodak fell $1.31 to $67 after Prudential Securities said the company’s profit margins on film will continue to suffer from the price war launched by Fuji Photo Film.

But GM shot up $2 to $61.88. Smith Barney analyst David Garrity said the world’s largest auto maker is likely to boost its dividend 25% by the end of the year.

In foreign trading, Mexican shares rocketed for a second day, with the Bolsa index up 1.9% to a record 5,067.83 in the wake of falling interest rates.