- The Washington Times - Wednesday, June 23, 2004

NEW YORK (AP) — Wall Street had its second straight late-session rally yesterday, but the pattern of trading left market watchers doubtful that the advance would hold ahead of a key Federal Reserve meeting and the turnover of power in Iraq next week.

Investors have largely factored in the expected rise in interest rates and a shaky transition of power in Baghdad, so many analysts think the sideways trading of the past several weeks could continue even after those events have passed. But the late-day buying was still encouraging.

The idea that the “smart money” moves in at the end of the day is “an old line,” said Bill Groenveld, head trader for vFinance Investments. “But it gives me a warm feeling. … I think whenever more people decide to step up, it’ll be to the upside.”

The Dow Jones Industrial Average gained 84.5, or 0.8 percent, to finish at 10,479.57, in positive territory for the year for the first time since April 27.

The broader gauges also closed within a few points of their intraday highs. The Nasdaq Composite Index surged 26.83, or 1.4 percent, to 2,020.98. The Standard & Poor’s 500 Index rose 9.65, or 0.8 percent, to 1,144.06.

Despite strong corporate earnings and robust economic growth, concern about rising interest rates, higher fuel prices and the situation in Iraq has paralyzed investors in recent weeks.

But with so much anticipation, analysts say the market is likely to have a muted reaction to the Fed’s June 29-30 meeting, when the policy-making group is expected to raise interest rates by at least 0.25 percent, and the June 30 return of sovereignty in Iraq.

The next major development to propel stocks higher may not come until companies start reporting second-quarter earnings next month. Until then, investors will be closely monitoring corporate forecasts and economic numbers, including the weekly labor market figures expected today, and the government’s report on gross domestic product tomorrow.

They will also be watching to see what signals the Fed sends next week. Aside from the details of the initial rise in interest rates — some expect a 0.5 percentage point rise — investors will be looking for assurance that the Fed is willing to take more aggressive action to curb inflation, should it become necessary, said Peter Cardillo, market analyst with S.W. Bach & Co.

“Obviously the market is in a stagnant mood. It’s stuck in a trading range,” Mr. Cardillo said. “But we have some significant uncertainties, in the Middle East, with Iraq, and the Fed. The market wants some confirmation and a statement that they will be ready to raise rates more next time, if they need to.”

R.J. Reynolds Tobacco Co. soared $2.43 to $68.33 on news its proposed $2.6 billion merger with Brown & Williamson has been approved by the Federal Trade Commission. The combination of the nation’s second- and third-largest cigarette makers still must be approved by the Securities and Exchange Commission and RJR shareholders. British American Tobacco PLC, the parent company of B&W;, was up $1.35 at $32.12.

FedEx Corp. added $1.62 to $80.05 after the package delivery company reported better than expected earnings.

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