- The Washington Times - Wednesday, March 20, 2002

NEW YORK (AP) Wall Street's appetite for stocks held steady yesterday after the Federal Reserve left interest rates unchanged for the time being but indicated that an increase was possible later this year.

Stocks ended the session higher despite a pullback from an earlier rally. Analysts attributed the muted response to the fact the Fed move had been widely anticipated.

The Dow Jones Industrial Average closed up 57.50, or 0.5 percent, at 10,635.25, after rallying as much as 95 points. It was the Dow's highest close this year 3 points above its previous high of 10,632.35 on March 12.

Broader stock indicators also advanced. The Standard & Poor's 500 Index rose 4.74, or 0.4 percent, to 1,170.29, and the Nasdaq Composite Index climbed 3.81, or 0.2 percent, to 1,880.87.

"Almost every market strategist coming into this had said the Fed would go to a more neutral posture and leave rates unchanged, and that's exactly what happened," said Bill Barker, investment consultant at RBC Dain Rauscher. "Maybe we'll see a rate hike at the next meeting or in June, but there's still enough uncertainty out there for them to wait."

In a statement issued after its regularly scheduled meeting, the Federal Reserve kept interest rates unchanged, but hinted future increases were possible. The central bank was cautious, however, noting that "the [economys] degree of strengthening … is still uncertain."

The Fed cut rates 11 times in 2001 in an aggressive effort to stimulate growth and help the economy emerge from recession. It will start raising rates when it believes business is strengthening, so that growth occurs at a reasonable, sustainable rate.

In trading yesterday, Goldman Sachs rose $1.85 to $91.05 after reporting first-quarter results well above analysts' expectations.

Procter & Gamble advanced $2.28 to $89.94 after it boosted its forecast for the third quarter and fiscal year.

Tech stocks were more mixed. Intel rose 10 cents to $31.72, while Nokia dropped 68 cents to $21.73.

Hewlett-Packard fell 45 cents to $18.80 after its chief executive, Carly Fiorina, said it had won a closely contested shareholder vote to approve its merger with Compaq. The official results of the vote were not expected to be available for days. Compaq gained 78 cents to $11.14.

HP is a Dow stock, and its decline late in the session limited the average's gains.

Stocks have been steadily advancing all month, although the pace has slowed in recent sessions as investors try to assess whether company profits will be strong enough to justify the gains.

Wall Street is particularly interested in first-quarter earnings reports, which begin next month. If the results are stronger than expected and companies' forecasts are bullish, stocks could rise even more. Disappointing reports might prompt investors to pull back.

"What you have is a moderate market trying to garner strength from data that's coming down the pipe," said Bryan Piskorowski, market commentator at Prudential Securities. "The problem is that Wall Street has a tendency to bake a lot into the cake, and I think a lot of that data or any good news might already be discounted into stock prices."

Also, a Commerce Department report yesterday said the U.S. trade deficit swelled to $28.5 billion in January because of increased oil imports and the lowest level of exports in more than three years.

Advancing issues led decliners 8 to 7 on the New York Stock Exchange. Volume came to 1.24 billion shares, compared with 1.15 billion Monday.

The Russell 2000 index rose 1.93 to 504.73.

Overseas, Japan's Nikkei stock average rose 2.6 percent. In Europe, Germany's DAX index climbed 0.7 percent, Britain's FT-SE 100 advanced 0.3 percent and France's CAC-40 rose 0.4 percent.

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