- The Washington Times - Friday, March 1, 2002

NEW YORK (AP) A brief surge of enthusiasm evaporated on Wall Street yesterday, gradually pulling stock prices lower in what turned out to be another lackluster session. Blue chips fell into losing ground in the last half-hour of trading, while technology issues stumbled earlier on a profit warning from Gateway.

Stocks initially had a healthy, widespread advance on news that the economy grew by a stronger-than-expected rate in the fourth quarter. An uptick in business activity in the Chicago area also prompted strong buying.

But the market repeated a now-familiar pattern of retrenching whenever it climbed to a point where investors believed it would be prudent to cash in their profits.

So the Dow Jones Industrial Average closed down 21.45, or 0.2 percent, at 10,106.13, having risen as much as 111 points in the first hour. The Dow's moves mirrored those of Wednesday, when it surged nearly 140 points on positive comments from Federal Reserve Chairman Alan Greenspan, then closed up a slim 12.32.

The broader market also finished lower yesterday. The Standard & Poor's 500 Index declined 3.16, or 0.3 percent, to 1,106.73, while the Nasdaq Composite Index fell 20.36, or 1.2 percent, to 1,731.52.

For much of the session, there was modest buying activity pegged largely to a Commerce Department report on the gross domestic product. GDP rose at an annual rate of 1.4 percent in the final three months of 2001, surpassing analysts' expectations for a 0.9 percent increase.

The Purchasing Management Association of Chicago also had positive news, saying its index of area business rose to 53.1 percent in February on a seasonally adjusted basis from 45.1 in January. A reading higher than 50 indicates expansion in the manufacturing sector, and a reading less than 50 signals a contraction.

The Chicago survey is considered a reliable forecast of the index of the Institute for Supply Management, formally the National Association of Purchasing Management, which is to be released today.

But Wall Street's response, from enthusiastic to uninspired, was similar to Wednesday's trading, when stocks advanced strongly after Fed Chairman Greenspan told Congress the recession is nearly over, although the economic recovery won't be particularly robust. Stocks later lost most of those gains.

"I think Mr. Greenspan underscored the whole thing. He talked about moderation. The economy is coming out of the recession, but it is not vigorous," said Larry Wachtel, market analyst at Prudential Securities.

Prospects of a robust turnaround likely would prompt investors to buy up riskier tech shares, Mr. Wachtel said. Instead, technology continues to slump as companies put off orders for new computer and networking equipment.

"Capital spending is certainly not vigorous, which is why the Nasdaq is down. I see no signs that companies are spending on telecommunications, software or technology," Mr. Wachtel said.

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