Nasdaq Rises to New High; Blue Chips Dip

Blue-chip stocks snapped a three-day record-breaking rally to end lower Thursday, but the Nasdaq set another all-time high and bond prices rose for a fourth day in a row as investors awaited today’s key July employment report.

The dollar rose.

The Dow Jones industrial average fell 32.28 points to 8,222.61.

But the broader market moved solidly forward. Continued strength in market-leading computer and financial stocks pushed the Standard & Poor’s index of 500 stocks and the Nasdaq composite index to fresh highs.

The S&P; 500 rose 2 points to 954.29 and the Nasdaq composite finished up 5.76 points at 1,593.81.

On the New York Stock Exchange, advancing issues outnumbered declines by a ratio of 1,716 to 1,145 in heavy trading.

On Thursday, the government reported that the gross domestic product expanded at a 2.2% annual rate in the April-June second quarter, less than half the revised 4.9% pace in the first quarter.

A key inflation measure in the GDP report--the implicit price deflator--edged up 1.4% in the second quarter after a 2.4% first-quarter rise.

The inflation-sensitive bond market extended its rally, with the price of the 30-year Treasury rising, reducing its yield to 6.30% from Wednesday’s 6.32%. Bond prices and yields move in opposite directions.

Market players linked the Dow’s drop to profit-taking by investors wary of the release today of the July U.S. payrolls, wages and employment report ahead of the stock market opening.

“I think the lack of enthusiasm is because of waiting for tomorrow morning’s release,” said Robert Stovall, president of Stovall/Twenty-First Advisers.

Economists expect, on average, for the report to show the economy created 193,000 new jobs in July, compared with 217,000 in June. The unemployment rate is expected to dip to 4.9% from 5% in June.

The market will also get the July report from the National Assn. of Purchasing Management today.

Stronger-than-expected data could derail the rally in stocks and bonds by raising inflation fears. But some analysts said the recent wave of economic news showing mild growth and subdued inflation reduces the chances the market will be blindsided by the reports.

“These things weigh a lot less on our minds now that there’s such a preponderance of evidence that the economy’s growing at a strong rate without inflation pressure,” said Robert Robbins, market strategist at Robinson-Humphrey Co.

Among Thursday’s highlights:

* Nasdaq’s surge was powered by computer stocks, paced by Dell, which gained $3.25 to a record $85.25, and Compaq Computer, up $2.13 to $57.13. Hewlett-Packard rose $2.19 to $70.

* Optimism that interest rates will stay low or fall benefited the nation’s largest banks. NationsBank rose $1 to $71.19, First Chicago NBD gained $3.50 to $75.88 and Chase Manhattan rose $1.06 to a record $113.19.

Brokerages also rose. Morgan Stanley Dean Witter rose $2.56 to $52.31, Salomon jumped $4.06 to $64 and Bear Stearns gained $2.19 to $41.

* The Dow average was dragged down by stocks that don’t do well when the economy slows. Caterpillar fell $3.50 to $56, Goodyear fell $1.44 to $64.69 and Allied Signal lost $1.31 to $92.25.

In late New York trading in the currency market, the dollar rose to 118.65 Japanese yen, up from 118.41 yen.

Overseas, London’s FTSE-100 closed at 4,907.5, down 19.8 points, or 0.4%. In Tokyo, the 225-share Nikkei average closed at 20,331.43, up 118.61 points, or 0.59%.