- The Washington Times - Wednesday, June 18, 2003

NEW YORK (AP) — Profit warnings from Eastman Kodak and Clorox unnerved Wall Street yesterday, prompting investors to cash in profits from two days of gains. But technology issues rose modestly, lifted in part by brokerage upgrades of three semiconductor companies.

While the warnings raised fears that investors had misread signs of economic recovery, some pullback is to be expected after more than three months of rallies.

Most market watchers remain optimistic about the stock market’s long-term prospects, saying the latest rally has more staying power than advances that fizzled in the bear market.

“Right now, indications are that this could be more than a bear-market rally. The jury is still out, but I think for the bulls there have been some wins, [like] the S&P; 500 taking over the 1,000 area,” said Todd Salamone, director of trading at Schaeffer’s Investment Research in Cincinnati.

The Dow Jones Industrial Average closed down 29.22, or 0.3 percent, at 9,293.80. The decline followed a two-day gain of 205.90, nearly all of which resulted from a big rally on Monday.

The market’s broader gauges were mixed. The tech-focused Nasdaq Composite Index rose 8.70, or 0.5 percent, to 1,677.14.

The Standard & Poor’s 500 index declined 1.57, or 0.2 percent, to 1,010.09, having finished Monday’s session at its highest close since June 19, 2002, when it stood at 1,019.99.

By the end of yesterday’s session, the Dow was up 23.5 percent from where it stood March 11, when the heavy buying began. Meanwhile, the Nasdaq has surged nearly 32 percent and the S&P; 500 has gained 26.1 percent since then.

Technology stocks have been the biggest winners, which analysts attribute to signs that capital spending on tech products is increasing. Many market experts believe that a rebound in the market and the overall economy is contingent upon a resurgence in tech spending.

“There is an increasing amount of confidence that we are going to get the recovery we have been hoping for, for the last year. There are some indications that tech spending by small- and intermediate-sized companies is starting to pick up,” said Matt Brown, head of equity management at Wilmington Trust.

Brokerage-house upgrades of semiconductor companies also helped the tech sector to advance Wednesday.

PMC-Sierra rose 93 cents to $13.33, Vitesse Semiconductor advanced 56 cents to $5.62, and Applied Micro Circuits inched up 5 cents to $6.27. Lehman Brothers raised its rating on the three chipmakers to “equal-weight” from “underweight.”

But blue-chip issues fell on disappointing earnings news.

Dow industrial Kodak dropped $3.22 to $28.77 after cutting its second-quarter earnings outlook.

Clorox fell $2.96 to $42.29 after reducing its quarterly and annual profit estimates.

Among other losers, UBS declined 88 cents to $56.97 after announcing it was cutting 500 investment-banking jobs, or 3 percent of its investment-banking work force, in an effort to deal with the slow economy.

Declining issues outnumbered advancers slightly more than 3-to-2 on the New York Stock Exchange. Volume was a light 1.46 billion shares, below Tuesday’s already thin 1.47 billion.

The Russell 2000 index, which tracks smaller-company stocks, fell 0.50, or 0.1 percent, to 457.51.

Overseas, Japan’s Nikkei stock average finished yesterday up 0.7 percent. In afternoon trading in Europe, France’s CAC-40 and Britain’s FTSE 100 each rose 0.4 percent, while Germany’s DAX index gained 0.5 percent.

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