- The Washington Times - Saturday, August 17, 2002

NEW YORK (AP) Turning cautious after Wall Street's big two-day rally, investors left stocks mixed yesterday, taking some profits in blue-chip issues and doing some buying in the technology sector. Still, the major stock indicators all scored their second straight weekly advance, an achievement not seen in five months.

"The bottoming process is in hand," said Larry Wachtel, market analyst at Prudential Securities, of the market's two-week gains.

The Dow Jones Industrial Average closed down 40.08, or 0.5 percent, at 8,778.06. The loss was attributed largely to profit-taking after the Dow's two-day gain of 335.75.

Broader market indexes finished mixed. The Nasdaq Composite Index rose 16.00, or 1.2 percent, to 1,361.01, having advanced 75.73 in the two previous sessions. The Standard & Poor's 500 index fell 1.48, or 0.2 percent, to 928.77, after a two-day gain of 46.04.

The market's three major gauges claimed their second straight weekly advance, a feat they last accomplished in the two-week period ended March 8. The Nasdaq was the week's biggest winner, surging 4.2 percent. The S&P had a weekly advance of 2.2 percent, while the Dow gained 0.4 percent.

Market observers attributed the two-week winning streak to signs that the market found a bottom in late July. The advance also reflected investors' relief that most of the nation's biggest companies were able to comply with a government deadline Wednesday to certify their financial results. Although the final count has yet to be completed, hundreds of chief executives affirmed their companies' numbers with few delays or restatements.

"The market is snapping back now, showing more resiliency," Mr. Wachtel said. "This is what is known as a proving out of the bottoming phase. You prove it out over time, just as you did in '87 and '74. Months went by before you were sure it was the bottom."

Mr. Wachtel said that stock prices are finally attractive to investors and that investments that had been more in favor, such as bonds and money markets, are becoming less attractive.

"Stocks relative to everything else look reasonable," Mr. Wachtel said. "You have institutional investors saying, 'Too many bonds, not enough stocks,' and individuals saying, 'I am not sure about stocks, but how long can I live on 1 percent'" in CDs or money markets.

Although analysts are pleased by recent rallies, they say it will take time to rebuild investors' faith in the market and the economy after two years of bear markets, and in companies after a string of accounting scandals.

"What we're going to have to look for are signs of improvements in the economy. Investors are going to be looking for a period of time to pass without significant negative developments," said Kevin Caron, market strategist with Ryan, Beck & Co.

Disappointing economic findings, including weaker-than-expected consumer sentiment, contributed to the lackluster tone yesterday on Wall Street.

The University of Michigan's consumer sentiment index for mid-August stood at 87.9, weaker than the 89.8 reading analysts were expecting, according to Dow Jones Newswires.

And the Commerce Department said housing construction in July fell 2.7 percent, the second straight monthly decline and weaker than the 0.5 percent increase some economists were forecasting.

On a positive note, the Labor Department reported that consumer inflation inched up 0.1 percent in July, lower than the 0.2 percent rise that analysts were expecting.

Among the winners yesterday, Target rose 50 cents to $35.54, the day after reporting a 27 percent increase in second-quarter profits.

Technology got a lift from Texas Instruments, rising $1.69 to $21.99 after reconfirming its third-quarter earnings outlook.

And Dell Computer advanced 39 cents to $27.53 the day after it reported a 27 percent increase in second-quarter profits.

As for decliners, Citigroup fell 94 cents to $34.90 on a report in the Wall Street Journal saying the National Association of Securities Dealers is looking into whether the firm's Salomon Smith Barney unit gave some clients shares of initial public offerings at below-market prices.

American Eagle Outfitters tumbled 98 cents to $14.79 after Morgan Stanley downgraded the stock.

Advancing issues outnumbered decliners nearly 5 to 4 on the New York Stock Exchange. Volume was light at 1.26 billion shares, below 1.51 billion on Thursday.

The Russell 2000 index, the barometer of smaller-company stocks, rose 5.24, or 1.3 percent, to 395.97.

Overseas, Japan's Nikkei stock average finished yesterday up 0.1 percent. In Europe, France's CAC-40 finished off 0.03 percent, Britain's FTSE 100 inched up 0.1 percent and Germany's DAX index rose 0.5 percent.

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