Palm lifts Nasdaq, but oil drags Dow down

By Edward Krudy

NEW YORK (Reuters) - The Nasdaq rose on Friday, on strong demand for Palm's Inc's (PALM.O) Pre smartphone, while the Dow was dragged lower by sliding oil prices and strength in some financial stocks helped cushion the S&P 500's decline.

The technology-heavy Nasdaq outperformed, helped partly by gains in Palm after it posted a narrower-than-expected loss late on Thursday and said demand was strong for its new Pre smartphone. Palm shares jumped nearly 16 percent to $16.22.

Weighing on sentiment, a jump in the savings rate suggested that the debt-burdened U.S. consumer may not drive the economy out of recession as fast as hoped.

Data showed that while consumer spending and income both rose in May as the government stimulus spread through the economy, much of the money was being stored away. Savings jumped to a record annual level of $768.8 billion, the highest level since record keeping began in 1959.

Robert Stimpson, portfolio manager at Oak Associates in Akron, Ohio, said that while he did not put too much store on the savings data alone, the trend in the United States was toward more saving and less spending.

"The U.S. markets are probably going to lag the rest of the world because we have a need to pay down debt, increase our savings rate and be better stewards of our own capital, which might lead to lower consumer spending versus the rest of the world," Stimpson said.

There was a strong surge in trade late in the session, pushing volume significantly above last year's daily average, as Russell Investments announced the final reconstitution of the widely followed Russell 3000 index.RUA.

But the session was relatively quiet for most of the day after a busy week that included Federal Reserve Chairman Ben Bernanke's contentious appearance on Capitol Hill and the sale of a record $104 billion in U.S. Treasury debt.