Closing Market Report

Star-Bulletin news services

Wednesday, June 20, 2001

Sluggish Wall Street
perks up at the close

By Amy Baldwin
Associated Press

NEW YORK >> Stock prices finally settled on solid gains today after investors spent a wobbly session perplexed by another batch of mixed signals about the economy and earnings.

Buyers deemed a better-than-expected report on the economy to be a plus. But sellers fretted over the latest string of analysts' downgrades of high-profile companies.

The Dow Jones industrial average finished up 50.66 at 10,647.33. The Dow bounced back from several dips into negative territory.

The Nasdaq composite index rose 38.58 to 2,031.24, while the Standard & Poor's 500 index advanced 10.56 to 1,223.14.

Advancers led decliners by slightly more than 3 to 2 on the New York Stock Exchange, with 1,818 up, 1,275 down and 213 unchanged. Volume was 1.34 billion vs. 1.17 billion yesterday. The NYSE composite index rose 4.73 to 625.52, the American Stock Exchange composite index gained 3.58 to 913.66 and the Russell 2000 index jumped 7.13 to 495.86. The Treasury's 10-year note rose 6/32 to 98 13/32; its yield fell 3 basis points to 5.21 percent. The 30-year bond rose 12/32 to 95 29/32; its yield fell 3 basis points to 5.66 percent.

Investors were feeling somewhat optimistic after hearing that the Conference Board's Index of Leading Economic Indicators, a key forecasting gauge, rose 0.5 percent in May. The reading was better than the 0.3 percent analysts were expecting and a sign that the economy is poised to slowly recover.

Higher stock prices and lower interest rates drove the index upward last month, helping to set the stage for improvement in the business climate, economists said.

"This is telling you things are dismal now, but they're going to get better," said Hugh Johnson, chief investment officer at First Albany Corp. "Investors couldn't give a hoot about where they are, they give a hoot about where they're going. You don't drive a car by looking through the rearview mirror."

Plunging corporate earnings, massive layoffs and anemic manufacturing activity have combined to push share prices lower over the past year. Despite current gloomy conditions, the index suggests the groundwork has been laid for rosier economic times ahead, analysts said.Meanwhile, investors were evaluating testimony by Federal Reserve Chairman Alan Greenspan before the Senate Banking Committee. The market was hoping Greenspan would indicate whether the Fed will lower interest rates as expected and for the sixth time this year when it meets next Tuesday and Wednesday.

Greenspan didn't mention rates, but he did say the weakened economy has caused an increase in bad loans, which in turn has made bankers more cautious about lending.

He also noted weakness in several industries: health care, telecommunications, retailing, manu- facturing and California utilities.

"He is saying what we need to hear," said Arthur Hogan, chief market analyst at Jefferies & Co.

But the prospect of lower interest rates isn't enough for skittish investors, according to analysts, who said there needs to be proof that business has improved before buyers really return to Wall Street.

"Most investors right now are all from Missouri," known as the Show-Me State, said Joe Keating, chief market strategist for Fifth-Third Bancorp. "Investors are looking to actually see the rebound in the economy, see it gain some traction and see that it is firmer."

Some of blue chips' biggest gains came from safer sectors -- a sign that investors remain nervous about the economy and the market -- including pharmaceuticals and financials. Eli Lilly rose 81 cents to $79.52, while J.P. Morgan Chase, a Dow stock, advanced $1.08 to $45.60.

However, some more economically sensitive issues also managed to move up. Heavy equipment maker Caterpillar climbed $1.61 to $55.50, while Wal-Mart rose $1.01 to $49.80.

The Dow's gain was limited somewhat by 3M, which fell $1.76 to $118.60 after ABN Amro reduced its rating on the company, citing a too-high stock price and a lack of earnings momentum.

In technology, cheaper stock prices factored into the buying. analysts said. The Nasdaq had fallen seven straight sessions before rising slightly yesterday.

"Some stocks have reached a point where some buyers feel they can step ahead of the Fed's next interest rate cut," said Alan Ackerman, executive vice president of Fahnestock & Co.

The tech sector was led higher by Intel and Oracle, both of which have made bullish comments this week on their business. Intel rose 82 cents to $27.49 after CEO Craig Barrett said in a CNBC interview that he still foresees a turnaround in the second half of 2001. Software maker Oracle was up 76 cents at $17.52. On Monday, Oracle executives told analysts its sales outlook in the United States looks much healthier than three months ago.

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