- The Washington Times - Friday, August 1, 2003

NEW YORK (AP) — Wall Street pulled back yesterday after a lackluster employment report renewed investors’ worries that the economic recovery would not be as speedy as hoped. The Dow Jones Industrial Average fell nearly 80 points to end a four-week winning streak.

“Even though unemployment went down, the number of jobs available did, too, and that’s really key,” said Mike Kayes, chief investment officer at Eastover Capital in Charlotte, N.C. “Investors have been looking for when the economy can create jobs and it hasn’t yet.”

The Dow closed down 79.83, or 0.9 percent, at 9,153.97, more than wiping out a 33-point gain in the previous session that marked its fifth straight winning month.

The broader market also declined. The Nasdaq Composite Index fell 19.43, or 1.1 percent, to 1,715.59, having notched a six-month winning streak. The Standard & Poor’s 500 index lost 10.16, or 1 percent, to 980.15, after it posted a fifth month of gains Thursday.

For the week, all three main gauges finished lower, with the Dow losing 1.4 percent, the Nasdaq lower 0.9 percent and the S&P; declining 1.9 percent. The Nasdaq and S&P; posted their second losing week in three.

The Labor Department reported the nation’s unemployment rate declined to 6.2 percent in July from 6.4 percent in the previous month. The figure was slightly better than analysts’ estimates, but much of the drop came from the 470,000 disenchanted people who abandoned job searches.

Meanwhile, the Institute for Supply Management said its manufacturing index rose to 51.8 in July from 49.8 in June. A reading above 50 indicates expanding manufacturing activity; analysts had been forecasting a July reading of 52.0.

Trading has been choppy in recent weeks as investors, having sent stocks surging since mid-March, are now seeking proof of a strong economic recovery. Many investors believe employment in particular must show clear improvement for the rebound to continue.

“There was no real hurrah in the reports today to keep the market sustained in its current overbought condition,” said A.C. Moore, chief investment strategist for Dunvegan Associates in Santa Barbara, Calif.

“The market in the very short term is governed by investor sentiment, which moves from a glass half-full to a glass half-empty to a glass half-full,” he added. “We think the market will move to a half-empty stage before making another move.”

Mr. Kayes agreed. “For the overall market to move forward, we need clear signs the economy is getting better,” he said.

“Even though second-quarter earnings were by-and-large decent, top-line growth wasn’t really there.

A lot of [positive] earnings surprises came from cost-cutting and a lower tax rate, issues that might not be a real long-term sustainable driver.”

Johnson & Johnson dropped $1.36 to $50.43 after Merrill Lynch cut the company’s stock rating to “neutral” from “buy.”

ChevronTexaco declined $1.06 to $71.05 after the oil company reported quarterly operating profits that handily beat Wall Street’s expectations.

Gainers included Disney, which gained 60 cents to $22.52, after the media and entertainment company posted quarterly profits that beat analysts’ estimates by 2 cents per share; it also said operating results should continue into the fourth quarter and in 2004.

Altria Group rose 27 cents to $40.28 after a California jury cleared its Philip Morris unit of negligence and misrepresentation in a tobacco lawsuit.

Declining issues outnumbered advancers about 5-to-2 on the New York Stock Exchange. Volume was moderate.

The Russell 2000 index, a barometer of smaller company stocks, fell 7.94, or 1.7 percent, to 468.08.

Overseas, Japan’s Nikkei stock average finished 0.5 percent higher yesterday. In Europe, France’s CAC-40 declined 1.3 percent, Britain’s FTSE 100 lost 1.4 percent and Germany’s DAX index fell 1.4 percent.

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