Broader rally fizzles, but
technology shares pull
off 3-day advance

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By Amy Baldwin
Associated Press

NEW YORK >> Wall Street's rally stalled today as investors cashed in some of their profits from two days of big gains. But the technology sector managed to advance for a third straight day, an achievement not seen since early April.

Analysts said the market was tentative following mixed economic news -- a rise in consumer prices and an increase in industrial production. That made investors cautious about sending stocks much higher, particularly after the Dow Jones industrials surged a total of 358 points on Monday and Tuesday.

"The evidence mounts that we are on the recovery side of things, and the economists are bullish. But we aren't going to have a big rally until we get some confirmation of earnings and revenue growth," said Philip Dow, managing director of equity strategy at Dain Rauscher Wessels.

The Dow closed down 54.46, or 0.5 percent, to 10,243.68. Advancing issues narrowly outnumbered decliners 16 to 15 on the New York Stock Exchange where volume was moderate.

The broader market was mixed. The Nasdaq composite index rose 6.51, or 0.4 percent, to 1,725.56, after a two-day gain of 118.20. The Nasdaq had not seen three consecutive wins since a four-day rally March 26 through April 1. The Standard & Poor's 500 index fell 6.21, or 0.6 percent, to 1,091.07, after rising 42.29 Monday and Tuesday. The Russell 2000 index rose 1.81, or 0.4 percent, to 513.53.

The price of the Treasury's 10-year note was up 9/32 today to 97 1/4, while its yield fell to 5.24 percent from 5.29 percent late yesterday. The 30-year bonds were up 6/32 to 95 1/32, yielding 5.73 percent.

Many analysts believe the market's recent selloff climaxed last week when the major indexes closed at levels not seen since early October. In the short run, they expect the indexes to trade within a narrow range.

"I don't think we are quite through with the down days, but I think we are at the end of the decline," said Al Mirman, strategist at V Finance in Sarasota, Fla.

Mirman added the market can't keep rising at the intense pace of Monday and Tuesday because technical factors -- short-covering and lower prices -- were the catalysts rather than a change in fundamentals like earnings growth. In short-covering, investors who had bet that the market was headed lower are forced to buy stocks when the market advances.

The ability of enticing prices to move the market was limited today after two days of strong buying prompted some profit taking.

While the tech sector eked out an advance, stocks themselves were mixed. Applied Materials inched up 11 cents to $26.75 after releasing stronger-than-expected second-quarter earnings late yesterday and offering cautious optimism about the future.

But Dow industrial IBM fell 98 cents to $84.50 as executives prepared to meet later in the day with analysts to discuss its business outlook.

Hewlett-Packard, also a Dow stock, fell $1.15 to $19.35 after releasing earnings results late yesterday for its fiscal second quarter. The company met expectations but refused to make projections about future business, saying more details will be disclosed at a securities analysts meeting June 4.

Outside tech, Schering-Plough slid $3.49 to $25 on news that the Food and Drug Administration is conducting a criminal investigation into one or more of the company's products made in Puerto Rico.

Honeywell slipped 9 cents to $39.25 after announcing it was laying off as many as 900 workers and closing four facilities near Minneapolis.

Today's economic news was mixed. The Labor Department reported the Consumer Price Index rose by 0.5 percent in April, the largest increase in almost a year and slightly worse than analysts expected. On the upside, industrial production at U.S. factories, mines and utilities rose 0.4 percent in April, the fourth straight monthly advance, according to the Federal Reserve.

Overseas, markets were higher with Japan's Nikkei stock average climbing 2.5 percent. In Europe, France's CAC-40 and Germany's DAX index each rose 0.5 percent, and Britain's FTSE 100 gained 0.4 percent.