- The Washington Times - Tuesday, June 24, 2003

NEW YORK (AP) — Investors made few moves yesterday ahead of a decision on interest rates, leaving blue chips moderately higher and tech stocks narrowly lower in a lightly traded session.

A mixed batch of economic news, amounting to a sales warning from Advanced Micro Devices and a better-than-expected reading on consumer confidence, added to the market’s wait-and-see approach.

Investors were anticipating that the Federal Reserve’s Open Market Committee once again would lower rates today to stimulate the economy.

Analysts say that expectation already has been factored into the market’s rallies over the past few weeks and that investors at this point are more concerned with what the Fed has to say about the economy’s health.

“What are significant are the Fed’s comments … about what they say they see as far as economic growth and the risk of deflation,” said Brian Bush, director of equity research at Stephens Inc. in Little Rock, Ark. “Since the Fed brought up the risk of deflation in their last meeting, I think investors will want to see their assessment as to how real that perceived risk is.”

The Dow Jones Industrial Average closed up 36.90, or 0.4 percent, at 9,109.85, wiping out more than a quarter of Monday’s 127.80-point, profit-taking loss.

The market’s broader gauges were mixed. The Nasdaq Composite Index fell 5.14, or 0.3 percent, to 1,605.61. The Standard & Poor’s 500 index rose 1.80, or 0.2 percent, to 983.44.

Wall Street’s primary focus was the Fed, which began a two-day meeting yesterday and was scheduled to deliver a decision on interest rates today.

The Fed said last month the economy was poised to recover in the second half of the year but also that another cut could be in the offing because of a threat of deflation. In deflationary economies, unemployment worsens and the demand for products further slackens.

“What we are looking for tomorrow is confirmation of what the Fed has already told us … that there will be a second-half recovery and this rate cut [would be] an insurance policy against deflation,” said John Caldwell, chief equity strategist for McDonald Financial Group, a unit of Cleveland-based KeyCorp.

If the Fed does reduce borrowing costs, it would be the 13th time it has done so since the beginning of 2001 and it would bring interest rates to their lowest levels since the 1950s.

The Conference Board said yesterday its Consumer Confidence Index was stable in June, reflecting a more upbeat mood about the economy and the stock market longer-term prospects even in the face of a difficult business climate.

The private research group reported that the index crept back to 83.5 from a revised 83.6 in May, better than the reading of 82 that analysts had forecast.

Kroger rose 93 cents to $16.83 on quarterly profits that were a penny a share higher than Wall Street predicted.

BellSouth climbed 48 cents to $27.50 after announcing it was increasing its quarterly dividend to 23 cents from 21 cents.

Merrill Lynch advanced 92 cents to $46.64 after Prudential Securities raised its recommendation on the investment banker’s stock to “buy” from “hold.”

But Advanced Micro Devices fell 28 cents to $6.31 after cutting its second-quarter sales estimate to $615 million from $715 million.

The chip maker cited deterioration in the personal computer and handset markets in Asia, largely because of the outbreak of severe acute respiratory syndrome (SARS).

Advancing issues outnumbered decliners nearly 4-to-3 on the New York Stock Exchange. Trading volume was light.

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