- The Washington Times - Monday, June 23, 2003

NEW YORK (AP) — Investors, lacking major earnings or economic news to guide them, fell back on profit-taking yesterday, sending stocks sharply lower and knocking the Dow Jones Industrial Average down 128 points.

Analysts expect the market to pull back or make little progress in advance of a decision tomorrow on interest rates. Investors expect that the Federal Reserve’s Open Market Committee will once again cut rates to stimulate the economy, and analysts say that expectation has largely been factored into higher stock prices.

“The market has been extended. … You have some people saying, ‘I am not going to wait for the [Feds] news to come out. I’m just going to book profits now,” said Richard A. Dickson, senior market strategist at Lowry’s Research Reports in Palm Beach, Fla.

After tumbling as much as 162 points, the Dow ended yesterday’s session down 128, or 1.4 percent, at 9,073. The decline followed last week’s gain of 0.9 percent, the Dow’s fourth consecutive winning week.

Entering the last week of the second quarter, the Dow is up 13.5 percent, putting the blue chips in position to achieve their best quarter since the fourth quarter of 1998, when they soared 17.1 percent.

The broader market also retreated yesterday. The Nasdaq Composite Index dropped 34 points, or 2.1 percent, to 1,611, having risen 1.1 percent last week.

The Standard & Poor’s 500 index fell 14, or 1.4 percent, to 982, having climbed 0.7 percent last week for its fourth straight weekly gain.

“What we have seen is a broadening out of [investors] appetite for equities, but only to a certain price. … Now we see investors being more discriminating,” said Joseph V. Battipaglia, chief investment officer at Ryan, Beck & Co. “That is what normally happens when you have such big moves higher.”

Yesterday’s losses were moderate compared with more than three months of strong rallies on Wall Street. Even with the session’s sell-off, the tech-focused Nasdaq is 26.7 percent above where it stood March 11, the low point from which the rallies ensued. The Dow has climbed 20.6 percent since March 11, while the S&P; has gained 22.6 percent.

Analysts said they were pleased to see the market give back some of its gains, having worried that stock prices were soaring out of control given the still-difficult economic conditions.

“The market is being very healthy. Investors are looking at the prospect for earnings very rationally,” Mr. Battipaglia said.

Among yesterday’s losers, hospital chain Tenet Healthcare dropped $4.22, or 26 percent, to $12.01 after warning that second-quarter earnings will be significantly below analysts’ forecast of 34 cents a share.

Brokerage-house downgrades contributed to yesterday’s losses.

JetBlue fell 94 cents, to $38.01, after Bear Stearns downgraded it to “peer perform” from “outperform.” R.J. Reynolds Tobacco declined 64 cents, to $36.36, after Morgan Stanley cut its rating to “underweight” from “equal weight.”

News of a merger pushed Biogen, which also issued a profit warning, down $2.25, to $41.55, and Idec Pharmaceuticals down $2.01, to $36.96. The two companies, both searching for cures for cancer and autoimmune disorders, announced plans to combine in a stock swap.

The companies said the deal would increase cash earnings per share by 15 percent upon closing and would save the new company, to be called Biogen Idec, $300 million in operating expenses through 2007.

Declining issues outnumbered advancers slightly more than 3 to 1 on the New York Stock Exchange. Consolidated volume was light at 1.75 billion shares, below Friday’s 2.24 billion.

The Russell 2000 index, the barometer of smaller-company stocks, fell 10.15, or 2.3 percent, to 439.41.

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