Closing Market Report

Star-Bulletin news services

Friday, January 25, 2002

Stocks end mixed amid
economic uncertainty

By Amy Baldwin
Associated Press

NEW YORK >> Investors gave blue chips another comfortable boost today but nudged tech shares slightly lower as they dealt with conflicting signals about the economy.

Working in Wall Street's favor were comments yesterday by Federal Reserve Chairman Alan Greenspan, who said the recession could soon be over. But with many companies still unable to confirm a pickup in business, the market's gains were limited and, in many cases, were more attributable to bargain-hunting than a shift in investor sentiment.

The Dow Jones industrial average finished up 44.01 at 9,840.08. The Dow pulled out a three-session winning streak, advancing 65 yesterday on Greenspan's comments and gaining 17 Wednesday due to bargain hunting.

The broader market was narrowly divided. The Nasdaq composite index slipped 4.88 to 1,937.70, while the Standard & Poor's 500 index inched up 1.13 to 1,133.28.

Advancers outnumbered decliners 8 to 7 on the New York Stock Exchange, with 1,576 up, 1,519 down and 219 unchanged. Volume was 1.33 billion shares.

The NYSE composite index rose 1.18 to 580.10, the American Stock Exchange composite index gained 1.47 to 835.82 and the Russell 2000 index slipped 0.38 to 479.35.

The Treasury's 2-year note fell 232 to 99 2132; its yield rose 3 basis points to 3.17 percent. Prices and yields move in opposite directions.

The 10-year note lost 1332 to 99 1732; its yield rose 6 basis points to 5.06 percent. The 30-year bond fell 14 to 98 34; its yield gained 2 basis points to 5.46 percent.

"The only way the market can get going is if earnings accelerate, and don't just sit around at the bottom," said Gary Kaltbaum, market technician for Investors' Edge Partners in Orlando, Fla. "If companies say, 'Things aren't getting any worse,' all that does is bump up stocks a bit. In order to get things going, you have to have growth again, and we just don't have that yet."

Today, blue chips enjoyed widespread gains, which analysts attributed largely to cheaper prices and somewhat to Greenspan's comments. Procter & Gamble rose $1.36 to $79.14, Honeywell climbed $1.10 to $32.70 and Caterpillar gained $1 to $50.10.

Better-than-expected earnings helped other stocks, including Lockheed Martin, up 59 cents at $50.

In tech trading, PMC-Sierra rose $2.29 to $24.15 after reporting a fourth-quarter loss of 15 cents a share, beating estimates by a penny. And, Goldman Sachs raised its rating on the maker of semiconductor equipment.

But disappointing reports and outlooks kept the tech sector from advancing. Fiber optic maker JDS Uniphase fell 73 cents to $7.16 on a wider-than-expected loss.

Computer maker Gateway slid nearly 18 percent, down $1.14 at $5.22, after announcing yesterday it will cut 2,250 jobs and close 19 stores and several offices as it deals with sluggish sales and declining market share. Gateway earned 2 cents a share, meeting Wall Street's expectations.

Additionally, several investment banks, including Morgan Stanley and Bank of America, downgraded Gateway's shares.

Stocks have largely fallen this month amid a lack of positive news from companies.

Analysts said the selloff wasn't surprising given how strongly investors snapped up shares late last year based on hopes of a rebound in profits rather than evidence of growth.

By Jan. 4, the buying had propelled the Dow to its best close since the terror attacks. The Dow stood at 10,259.74, up 24.5 percent from its Sept. 21 low of 8,235.81. The Dow is now 19.4 percent above that low.

"The fourth-quarter rally was an anticipatory rally that comes as you believe the worst is over. Some pullback from that was expected," said Ronald J. Hill, investment strategist at Brown Brothers Harriman & Co. "When earnings start to come through in earnest, there will be a second, more fundamental leg up. We're kind of in a hiatus right now."

Meanwhile, Kmart Corp., which filed for bankruptcy protection earlier this week, said today it has begun an investigation after receiving an anonymous letter claiming to be from employees that expressed concern about unspecified accounting matters.

The nation's third biggest discount retailer said it had contacted the Securities and Exchange Commission about the letter and its own investigation and is cooperating with the regulatory agency.

The disclosure comes amid heightened sensitivity in the wake of the collapse of the energy trader Enron Corp. amid questionable accounting practices.

Kmart said the letter was addressed to the SEC, Kmart's auditors, PricewaterhouseCoo- pers, and the company's board of directors.

"The letter has been referred to the audit committee of the board of directors, which promptly engaged outside counsel and accounting consultants to conduct an independent investigation," the company said in a news release.

After receiving the letter, Kmart said it contacted the SEC and notified it about its own investigation. Kmart said the SEC has authorized a private investigation, and Kmart plans to fully cooperate with it.

An SEC spokesman said today that the agency had no immediate comment on the matter.

PricewaterhouseCoopers spokesman David Nestor confirmed that the company also received a copy of the letter. He said the auditor was cooperating with Kmart and its outside counsel in the investigation.

Troy-based Kmart filed Tuesday for Chapter 11, a move that came after lower-than-expected holiday sales and fourth-quarter earnings, downgrades by credit-rating agencies and a drop in stock prices.

Analyst Jeff Stinson with Midwest Research said it makes sense that Kmart and the SEC would be attentive to the claims raised in the letter, given the current publicity surrounding Enron's failure.

Kmart's shares closed down 8 cents to 85 cents today on the New York Stock Exchange. The stock is off more than 84 percent since the start of the year.

In overseas trading, Japan's Nikkei stock average finished today with a gain of 0.7 percent. In Europe, Britain's FT-SE 100 fell 0.8 percent, France's CAC-40 lost 0.5 percent, and Germany's DAX index declined 0.3 percent.

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