- The Washington Times - Wednesday, June 16, 2004

NEW YORK (AP) — Stocks wobbled in and out of positive territory yesterday, settling near unchanged levels as the market shrugged off a pair of economic reports that suggested continued strength in the recovery.

A surge in manufacturing activity and better-than-expected data on housing construction failed to impress investors, who are preoccupied with two events expected at the end of the month: an interest rate increase and the handover of sovereignty in Iraq. Analysts say the markets are likely to lurch sideways in the meantime, as investors wait to see what will happen.

“I think for the next several weeks, we’re not likely to see major directional moves,” said Jack Caffrey, equities strategist with J.P. Morgan Private Bank. “We’re more likely to see a few days up and a few days down. It’s going to be frustrating. But there will be some opportunities created, both to buy and to sell.”

The Dow Jones Industrial Average closed down 0.85, or 0.01 percent, at 10,379.58.

The broader gauges finished narrowly higher. The Nasdaq Composite Index gained 2.63, or 0.1 percent, to 1,998.23. The Standard & Poor’s 500 index added 1.55, or 0.1 percent, to 1,133.56.

There was fresh evidence that the recovery of manufacturers is on track, as the Federal Reserve reported a 1.1 percent rise in big industry production for May, the strongest showing in nearly six years. The advance well outpaced the 0.6 percent rise forecast by economists.

Separately, the Commerce Department reported that builders broke ground on fewer housing projects in May, but the level of activity was still brisk enough to exceed expectations. Total housing permits — a good barometer of current demand — were up 3.5 percent at 2.01 million units, the highest level in more than three decades.

Concern over oil prices was renewed after a sabotage attack in Iraq forced a suspension of exports from the Persian Gulf. The Organization of Petroleum Exporting Countries indicated its members would make up for any shortfall in Iraqi crude, but analysts worry about more attacks as the U.S.-led coalition prepares to transfer political power to local authorities on June 30.

Investors were in a better mood Tuesday, after Fed Chairman Alan Greenspan told Congress that inflationary pressures were not likely to be a serious concern in the months ahead. His remarks, widely interpreted as a signal that the Fed would take a measured approach to raising interest rates at its June 29-30 meeting, sparked a short-term rally. But analysts weren’t surprised to see the buying momentum evaporate by yesterday’s session.

“I wish the market would do something here that we could talk about, but there’s not a ton of volume,” said Todd Leone, managing director of equity trading at SG Cowen Securities. “I think people are waiting to see what’s going to happen on the 29th and 30th, when we hand over Iraq and the Fed comes out with rates.”

Delta Air Lines Inc. lost 24 cents to close at $5.71 after Chief Executive Officer Gerald Grinstein told analysts the carrier must cut costs to survive, saying he won’t accept a new contract with pilots unless it includes all the cuts he is seeking. Delta has the highest pilot labor costs in the industry.

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