Stocks trade lower, investors lock in profits for second day
By Amy Baldwin AP Business Writer
NEW YORK (AP) – Investors collected profits for a second straight day Wednesday as Federal Reserve Chairman Alan Greenspan reiterated a mixed assessment of the economy. Analysts also attributed the market’s pullback to earnings reports, saying that while most so far have been positive, the results haven’t wowed investors.
Stocks built on losses from Tuesday when Greenspan cautioned in the first of two days of congressional testimony that deflation, an economically dangerous long-term slide in prices, is still a possibility. Greenspan also said the economy is poised for strong growth in the second half of the year, which, while a good thing, raised questions about whether interest rates are headed higher.
“People are concerned that if rates go up this sort of nascent (economic) recovery could be in jeopardy. It is not a major fear, but given the advances the market has made since March, the tendency to take profits is out there,” said Richard A. Dickson, senior market strategist at Lowry’s Research Reports in Palm Beach, Fla.
The Dow Jones industrial average closed down 34.38, or 0.4 percent, at 9,094.59, according to preliminary calculations. The Dow lost 48.18 on Tuesday.
The Nasdaq composite index declined 5.24, or 0.3 percent, to 1,747.97. The Standard & Poor’s 500 index fell 6.33, or 0.6 percent, to 994.09.
The Labor Department reported that consumer prices increased by a modest 0.2 percent in June. The advance in the Consumer Price Index, the government’s closely watched gauge of inflation, followed a 0.3 percent decrease in April and flat prices in May.
The 0.2 percent rise matched analysts’ forecasts and could alleviate concerns the economy is poised for deflation, although that wasn’t apparent in Wednesday’s trading.
On Tuesday, Greenspan began his semiannual report on monetary policy before Congress, telling a House panel the economy is poised for stronger growth by year end but that there is still a threat of deflation. Still, Greenspan said the Fed would leave rates, which it has reduced 13 times since early 2001, low “for as long as it takes” to stimulate the economy.
Greenspan’s testimony continued Wednesday, this time before the Senate Banking, Housing and Urban Affairs Committee. His comments mirrored those made Tuesday.
Analysts said quarterly earnings results, which companies began releasing in earnest this week, contributed to the market’s two-day decline. Investors were hoping companies would raise third-quarter and yearly outlooks, and had already factored strong second-quarter profits into higher stock prices.
Earnings are mostly exceeding or meeting expectations, said Brian Belski, fundamental market strategist at US Bancorp Piper Jaffray, but not to the degree they did following the first quarter .
Since the lows made on March 11, the Dow has gained nearly 21 percent, the Nasdaq has surged 37.5 percent and the S&P has advanced 24.2 percent.
“Given the fact that earnings are not blowing away numbers, people are a little concerns that prices have gotten ahead of themselves,” Belski said.
While EMC beat second-quarter earnings estimates by a penny a share, the maker of data storage equipment said its third-quarter results would merely meet expectations, causing its shares to fall 90 cents to $10.17.
Oakley dropped 79 cents to $11.32 after the maker of high-end sunglasses missed analysts’ earnings expectations by 2 cents a share.
Restaurant company O’Charley’s slid $2.51 to $19.22 after cutting its second-quarter earnings estimate.
Citigroup fell $1.31 to $45.52 on news that chairman Sanford I. Weill was giving up his job as chief executive, a move that followed months of speculation. Weill will remain chairman of the board until the 2006 annual meeting.
Citigroup has been defending itself against allegations of conflicts of interest in its investment banking business, mishandling initial public offerings and misleading the public in its dealings with Enron and WorldCom.
Newspaper publisher Knight Ridder rose 42 cents to $69.47 on second-quarter profits that exceeded Wall Street’s estimate by 2 cents a share.
Intel climbed $1.21 to $25.31, hitting a new 52-week high following earnings issued late Tuesday that beat analysts’ expectations by a penny a share.
Declining issues outnumbered advancers slightly more than 2 to 1 on the New York Stock Exchange. Volume was heavy.
The Russell 2000 index, the barometer of smaller company stocks, fell 3.25, or 0.7 percent, to 473.68.
Overseas, Japan’s Nikkei stock average finished Wednesday down 0.2 percent. In Europe, France’s CAC-40 fell 0.9 percent, Britain’s FTSE 100 forfeited 0.6 percent and Germany’s DAX index gained 0.1 percent.
____
On the Net:
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com