Wall St. shows 1st weekly gain in three months

On quiet day at end of a hectic week, trading is light

Nasdaq ends session down 10

Financial stocks take Dow, S&P 500 slightly higher

August 10, 2002|By Eileen Ambrose | Eileen Ambrose,SUN STAFF

And on the fifth day, Wall Street rested.

After starting the week with a 269-point drop and following it with three days of triple-digit gains, the Dow Jones industrial average took a breather yesterday and added 33.43 points on a day of light trading.

The 30-stock blue-chip index was down more than 135 points in the first hour of trading but quickly recovered and spent the rest of the day swinging between modest gains and losses before closing at 8,745.45.

"Everybody is taking a three-day vacation. People want to unwind a little bit," said Angel Mata, head of equity trading at Legg Mason Inc. in Baltimore. "Considering the violent nature of the market, I'm sure a lot of portfolio managers are saying, `I need a rest.' "

Morry Zolet, senior vice president in Salomon Smith Barney's Lutherville office, said, "You can't have 200 and 300 points upward and downward every day.

"I would hate to have all these giant moves upward. It would be too far, too fast."

The Nasdaq composite index, a high-tech bellwether, fell 10.40 points yesterday to 1,306.12. The broader Standard & Poor's 500 index rose 3.18 points to 908.64.

For the week, the three major stock indexes ended higher for the first time in three months. But for the year to date, the Dow is down 12.73 percent, the Nasdaq is off 33.03 percent, and the S&P 500 has fallen 20.86 percent.

Yesterday was a quiet end to a wild week.

It started Monday with renewed fears of another recession after a report showed that the service sector, the biggest piece of the economy, had slowed last month. Each of the three major stock indexes shed more than 3 percent.

That followed triple-digit losses in the previous two sessions, adding to worries that gains in the past couple of weeks might have been a bear market rally, in which investors rush back into stocks thinking the worst is over only to find prices fall again, Mata said.

By Tuesday, though, there was growing speculation that the Federal Reserve policy-makers might again cut a key short-term interest rate, already at a 40-year low, when they meet next week. The Dow gained 230 points.

The triple-digit gains continued the next two days after Cisco Systems Inc., an indicator of how the technology sector is faring, reported better-than-expected earnings and the prospects of an interest rate cut remained alive.

Over three days, the Dow gained 668.39 points, the first time it had had triple-digit gains three days in a row since March.

By yesterday, analysts were saying that chances of the Fed's lowering interest rates Tuesday seemed remote.

Meanwhile, the Labor Department reported that productivity, the amount of output per hour of work, rose an annual rate of 1.1 percent in the second quarter, its slowest rate in a year.

"We're likely to get a strong retail sales report [Tuesday]. The economy isn't going to look quite as weak," said Gary Thayer, chief economist with A.G. Edwards & Sons in St. Louis.

Some said an interest-rate cut is unnecessary.

"Whether the federal funds rate is 1.75 [percent] or 1.5 [percent] isn't going to make a huge difference," said David L. Straus, senior portfolio manager with Johnston Lemon Asset Management Inc. in Washington. "There is certainly not going to be any interest rate increases this year."

Chief executives and chief financial officers at hundreds of corporations face a Wednesday deadline for submitting sworn statements affirming the accuracy of their most recent annual and quarterly reports. Some have done so.

"It's hard to say how the market will react to that," Straus said. "We could continue to move higher here."

Ken Mayland, an economist and president of ClearView Economics in Pepper Pike, Ohio, said it's possible that the three-day surge will mark the beginning of a new bull market.

The bull market that started in 1982 and ran through the beginning of 2000 began with three consecutive days in August when the market had substantial gains, Mayland said. "The gains then were a 50- or 60-point move, not 400," he said. "But that was the start. Then we were off to the races."

Mayland noted that there's no guarantee that history will repeat itself, but he said there must be a reconciliation between the improving economy and the skittish market. "I'm much more inclined to believe ... the expanding economy will pull up the stock market," he said.

Elsewhere on the broad market, the Russell 2000 index, a benchmark of small-cap stocks, fell 1.39 to 388.45 and the Wilshire 5000 total market index jumped 59.91 to 14,751.64.

The Sun-Bloomberg index of the top stocks in Maryland shed 0.61 to 181.62. F&M Bancorp of Frederick tumbled $1.33 to $31.55, and Lockheed Martin Corp. lost 75 cents to $65.60.

Advancing issues narrowly outnumbered declining ones about 8-to-7 on the New York Stock Exchange. Volume was light at 1.3 billion shares, down from Thursday's 1.67 billion.

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