- The Washington Times - Friday, June 13, 2003

NEW YORK (AP) — Stocks slid yesterday despite growing hope for an interest-rate cut after a University of Michigan report indicated a sharp drop in consumer sentiment. Still, the Dow Jones Industrial Average and the Standard & Poor’s 500 Index managed to post a third straight week of gains.

“The consumer report coming out on a Friday after a nice rally gave a good reason to take profits,” said Barry Berman, head trader for Robert W. Baird & Co. in Milwaukee. “The market is just pulling back a little bit.”

Michigan’s widely watched index of consumer sentiment fell to 87.2 in mid-June from May’s reading of 92.1, Dow Jones Newswires reported. The reading was far below the level of 93 that market watchers had been expecting.

The Dow closed down 79.43, or 0.9 percent, at 9,117.12 after a three-day advance of 216.55.

Broader market indicators also finished lower. The Nasdaq Composite Index dropped 27.13, or 1.6 percent, to 1,626.49. The S&P; fell 9.90, or 1 percent, to 988.61.

For the week, the three main gauges were mixed, with the Dow up 0.6 percent, the Nasdaq slipping 0.1 percent, and the S&P; up 0.1 percent.

Investors took the Michigan report as a reason to trim back some of their stock holdings after a three-day rally. But market watchers said it was too early to conclude that the mood had soured in the market.

Stocks have been heading higher since March on growing hope that the economy will turn around in the second half of the year. But with several economic indicators coming in mixed, Mr. Berman said investors are not quite ready to fully believe in a recovery.

“The economic data hasn’t been real strong,” Mr. Berman said. “You’ve got something out there that you’re betting on that hasn’t materialized yet, and at some point you’re going to see it or not.”

On the plus side, expectations have been growing that the Federal Reserve would cut short-term interest rates at its June 24-25 meeting. Those hopes were further bolstered yesterday by a report from the Labor Department that wholesale prices fell 0.3 percent in May, following a record drop of 1.9 percent the previous month.

While the reports suggest the economy could be hit by deflation, a damaging trend in which prices for goods and services decline overall, investors hope the Fed will cut rates at its next meeting to stem the trend of lower prices.

“I wouldn’t say today’s declines are the start of a major pullback,” said Keith Keenan, vice president of institutional trading at Wall Street Access, a New York-based brokerage firm. “There’s still a significant amount of performance anxiety.”

“The psychology is incredibly bullish,” he added, referring to Wall Street’s three months of rallies. “Most money managers who are underperforming this market are buying. That’s why the market has been so resilient in the face of bad news.”

Guidant fell 61 cents to $39.95 in heavy trading after a subsidiary of the medical devices maker pleaded guilty to 10 felonies, including shipping misbranded products and lying to government regulators.

Oracle rose after the maker of business software reported stronger than expected earnings late Thursday. Oracle closed up 15 cents at $13.48 after several analysts upgraded the company’s shares.

Oracle also said it plans a series of presentations to investors to explain its proposed acquisition of PeopleSoft. PeopleSoft’s board formally rejected Oracle’s $16-per-share offer on Thursday. PeopleSoft declined 45 cents at $16.92.

Honeywell lost 5 cents to $27.86 even though the aerospace company reported $1.3 billion of new orders for jet parts and services.

Declining issues outnumbered advancers 9 to 5 on the New York Stock Exchange. Volume was light.

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