Analysts suspicious
of stock rally

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By Amy Baldwin
Associated Press

NEW YORK >> After languishing through the dog days of August, the stock market finally perked up yesterday with the Dow industrials enjoying a 194-point gain.

But that stellar performance notwithstanding, analysts say investors won't deviate long from their recent strategy, which has been to trade lightly and cautiously. And they'll keep making short-term decisions that have caused the market to fluctuate -- in the end, to stagnate.

Investors have reason to be careful as summer ends and many companies are expected to reduce their earnings outlooks for the third quarter.

"One of the most important changes in the market's performance has been the lack of positive mood, momentum and money flow that characterized the markets of the last four or five years when rallies followed rallies," said Alan Ackerman, executive vice president of Fahnestock & Co. "This market is much more selective. It swings to extremes. Traders are quick on the trigger."

Investors certainly haven't maintained any of their enthusiasm for long, and this past week proved that as the Dow alternated between winning and losing days. Yesterday's advance was an example of the upward extremes the market has enjoyed recently as technology companies -- in this case Cisco Systems -- have said that business is stabilizing.

Most analysts believe the market, which has been giving back such gains almost immediately, won't become strong enough to hold on to them anytime soon. "We've have just heard that stuff before. How many times have we heard that the worst is behind us in semiconductors?," said Richard Dickson, an analyst at Hilliard Lyons in Louisville, Ky. "That is all well and good, but we need more than anecdotal things. We need consistent results that things are getting better."

However, positive results, and therefore any upward momentum in the stock market, are likely a ways off. A steady stream of companies across an array of sectors already have issued profit and revenue warnings for the third quarter and the remainder of the year.

The Dow Jones industrial average gained 182.39, or 1.8 percent, for the week to 10,423.17 after rising 194.02 yesterday. The Nasdaq composite index rose 49.79, or 2.7 percent, to 1,916.80 for the week after gaining 73.83 yesterday. The Standard & Poor's 500 index gained 22.96, a rise of nearly 2 percent for the week, to 1,184.93. The index rose 22.84 yesterday.