Stocks mixed on
economic reports

The Dow slips 0.3% while
tech stocks manage a 1.6% gain

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By Hope Yen
Associated Press

NEW YORK >> Wall Street stumbled through a choppy session today and ended mixed, with blue chips giving up a modest gain and tech stocks holding on to their own moderate advance.

Investors were clearly ambivalent as they analyzed two economic reports. A Labor Department report of a jump in unemployment insurance claims fed early selling, but investors took some heart from a Commerce Department report on the gross domestic product.

"Those two forces are really counteracting each other," said Robert Froehlich, chief investment strategist for Deutsche Asset Management in Chicago.

Advancing issues led decliners 4 to 3 on the New York Stock Exchange. Volume was very light in advance of Labor Day. The Dow Jones industrial average closed down 23.10, or 0.3 percent, at 8,670.99. That came after a 1.5 percent decline yesterday.

The broader market was mixed. The Nasdaq composite index rose 21.38, or 1.6 percent, to 1,335.76, having fallen 2.5 percent. The Standard & Poor's 500 index dipped 0.07, or 0.01 percent, to 917.80, following a drop of 1.8 percent. The Russell 2000 index, which tracks smaller company stocks, rose 5.02, or 1.3 percent, to 394.40.

The price of the Treasury's 10-year note was up 19/32 point today, while its yield fell to 4.14 percent from 4.22 percent late yesterday. Two-year Treasury notes were up 5/32 point and yielded 2.07 percent, down from 2.17 percent yesterday.

The Commerce Department said the economy as measured by the gross domestic product grew in the second quarter at an annual rate of 1.1 percent, slower than the 5 percent pace in the first quarter. The reading was unchanged from its initial estimate a month ago.

But new claims for unemployment insurance rose by 8,000 last week to a seasonally adjusted 403,000, the highest level since July 6, according to the Labor Department. Economists had expected claims to decline.

Analysts said investors, despite initial concerns about the GDP number, later seemed to be somewhat encouraged that the figure was not revised downward. That would have raised fears of a possible double-dip recession.

Tech shares, meanwhile, got a boost on a bout of bargain-hunting. "It's more bottom-fishing more than anything else," Froehlich said. "Short sellers are covering their positions, giving some strength and stability to the market."

In a short sale transaction, investors borrow stock and sell it on the expectation of a market drop. When the market instead turns higher, they have to buy stock to pay back the debt. Some of the market's recent rallies, which due to an improved sentiment on Wall Street, have also been fed by short sellers buying stock back.

Analysts said the selling on Wall Street over the past few days is not surprising. Since its July 23 closing low of 7,702.34, the Dow is up about 1,000 points. But in the last week, ever since the Dow closed back above the 9,000 level, stocks have been pulling back.

"What's going on this week is some normal profit-taking," said Alfred E. Goldman, chief market strategist for A.G. Edwards & Sons Inc. "The big picture is a market that is bottoming, but it doesn't happen overnight."

Losers included companies with downgraded shares or disappointing earnings outlooks. General Electric fell 95 cents to $30.35 after Lehman Brothers cut its 2003 earnings estimates on the company.

Kroger dropped $1.16 to $18.34 after JP Morgan downgraded it to "market perform" from "buy." Shoe retailer Footstar dropped $2.10 to $11.45 after cutting its third-quarter outlook.

Helping boost tech stocks was Yahoo!, which rose $1.12 to $10.25, after Merrill Lynch boosted its rating to "neutral" from "sell."

Retailer Chico's rose $2.10 to $17.18 after meeting second-quarter earnings expectations.

Overseas, Japan's Nikkei stock average finished down 1.5 percent. In Europe, France's CAC-40 fell 2.6 percent, Britain's FTSE 100 declined 1.5 percent, and Germany's DAX index slipped 0.6 percent.