- The Washington Times - Tuesday, January 28, 2003

NEW YORK, Jan. 28 (UPI) — Stock prices on the New York Stock Exchange and the Nasdaq Stock Market were higher in moderate trading at midday Tuesday as investors digested a barrage of earnings and economic reports and awaited President Bush's State of the Union message.

The blue-chip Dow Jones industrial average, which sank 141.45 points Monday, was ahead 55.50 points to 8,045.00. The tech-heavy Nasdaq composite index, which fell 16.87 points in the previous session, was ahead 5.45 points to 1,330.72.

The broader New York Stock Exchange composite index was ahead 20.65 to 4,807.61 while the Standard & Poor's 500 index was ahead 5.84 to 853.32.

The American Stock Exchange composite index was down 4.77 points to 802.32 while the Wilshire 5000 Index was ahead 46.10 to 8,088.09.

Big Board volume rose to an estimated 705.90 million shares from 675.90 million shares changing hands during the same period Monday. Nasdaq volume slipped to an estimated 618.60 million shares from 645.30 million shares at midday Monday.

Market watchers said investors were reluctant to move back into the market and anxiety ahead of President George W. Bush's State of the Union speech Tuesday night was one of the main reasons why. The speech, at 9:00 p.m. EST, is likely to highlight the White House's views on the state of the economy, as well as give an insight on the administration's plans for Iraq.

Bush is also expected to seek to assure Americans his $674 billion tax cut plan holds the key to restoring growth in the lackluster U.S. economy.

Analysts said stocks rose from the opening bell as investors digested a barrage of earnings statements and reassuring earnings outlooks from heavyweights such as Merck & Co. Inc.

Experts said the market also drew support from some bottom fishing after several days of steep declines and several key readings on the economy, including a better-than-expected report on consumer confidence, which all combined to boost investor enthusiasm ahead of Bush's speech.

Wall Street has been losing ground for weeks and all three major market indicators are now in the red for the year, largely because of investors' misgivings over a possible war with Iraq and the effects it would have on the global economy.

The fact that the U.S. economy is showing few signs of improvement in its health has added further weight to the market, analysts said.

On the economic front, the Conference Board said consumer confidence was knocked down in January by the nation's continued lackluster economic activity and the threat of war with Iraq.

The private research group said its index measuring consumer confidence fell 1.7 percentage points to 79.0 from 80.7 in December.

Wall Street economists were expecting confidence drop to 78.3 during the month, which would have been its lowest level since November 1993.

The Board said the survey, which is based on a representative sample of 5,000 U.S. households, showed its present situation index rose to 75.4 from 69.6 but its expectations index dropped to 81.4 from 88.1 a month earlier.

Lynn Franco, director of the Conference Board's Consumer Research Center, said, "Overall readings continue to reflect the country's lackluster economic activity. Now, with the threat of war looming, consumers have grown increasingly cautious about the short-term outlook."

The Commerce Department reported new home sales rose to record levels in December, lifted by the lowest mortgage rates in 40 years.

The agency said new home sales jumped 3.5 percent in the final month of 2002 to a seasonally adjusted annual record rate of 1.082 million units. Economists on Wall Street had expected new home sales to decline 2.7 percent during the month. For all of 2002 sales rose to a record 976,000 beating the 2001 rate of 908,000 units.

The Commerce Department also reported new orders for big ticket items rose 0.2 percent in December to $170.1 billion after falling 1.3 percent in November. Economists were expecting orders for durable goods, or items meant to last three years or longer, to improve 0.8 percent during the month.

For all of 2002, the government agency said new orders fell 0.2 percent after dropping 11.6 percent in 2001.

Thomas J. Duesterberg, president and chief executive officer of the Manufacturers Alliance/MAPI, said, "The durable goods report is further evidence that the manufacturing sector is flat in the water. Although the fundamentals are positive, it will take a resolution of the international situation and positive momentum on the President's economic recovery plan to bolster confidence and achieve sustained growth."

Meanwhile, this week marks one of the busiest of the fourth-quarter earnings season. Investors focusing on corporate fundamentals got their daily fix of bottom line news with several Dow components reporting results.

SBC Communications fell after the company predicted a revenue decline for 2003, blaming loss of telephone access lines to its rivals. SBC also reported earnings that matched what analysts had expected.

But, Dow component Merck, the nation's second-largest drugmaker jumped after the company said its earnings rose slightly in the fourth quarter. Merck also forecast 2003 earnings higher than expectations.

And, the Federal Reserve began its two-day policy setting meeting and although hardly anyone on Wall Street expects interest rates to change, some economists suspect the Fed could change its bias, or its view on where the economy is headed, toward weakness, indicating that a rate cut could come sometime later this year.

Meanwhile, U.S. Treasury prices lost ground. The 10-year bond fell 13/32 to 99 28/32. Its yield, which moves in the opposite direction of its price, rose to 4.01 percent from 3.96 percent late Monday.

In Europe, stock prices ended fractionally higher in paper-thin trading in London, Frankfurt and Paris. The London International Stock Exchange's blue-chip FTSE-100 index rose 5.2 points to 3,486.0 — snapping its 11-day losing streak. The German DAX index added 5.96 points to 2,649.76 and the French CAC-40 index tacked on 4.29 points to 2,800.07.

Analysts said European stocks inched higher in sometimes fragile trading, supported by the early gains on Wall Street. The jittery atmosphere was due in part to some concerns over President Bush's State of the Union speech.

In Asia, prices ended lower for the third consecutive session on the Tokyo Stock Exchange, pressured by weakness in export issues. The blue-chip Nikkei Stock Average, which fell 122.18 points Monday, lost 84.08 points, or 0.98 percent, to 8,525.39.

Analysts said growing concerns of a potential conflict in Iraq rattled investors and dampened the earnings outlook for Japan's high-tech and auto exporters.

Experts also said investors have been shifting funds into defensives that are more dependent on the domestic economy and less vulnerable to a firmer Japanese yen.

Meanwhile, underlying the fragility of Japan's economic recovery, data before the opening showed that retail sales fell for the 21st straight month in December as concerns over falling incomes and employment prospects kept consumers from spending.

Elsewhere in Asia, prices ended higher in moderate trading on the Hong Kong Stock Exchange. The blue-chip Hang Seng Index, which fell 161.93 points during the previous session, rose 26.93 points, or 0.3 percent, to 9,325.60.

Analysts said the market ended slightly higher with exporters such as Johnson Electric and Li & Fung outperforming the broader market. But sentiment remained cautious on lingering uncertainties over Iraq.

Prices also ended higher on the South Korean Stock Exchange. The Korea Composite Stock Price Index, or Kospi, which lost 16.34 points during the previous session, rose 1.3 percent to 600.56 as investors hunted for bargains.

Prices ended slightly higher on the Taiwan Stock Exchange. The key Weighted Index, which lost 84.73 points during the previous session, rose 0.9 percent, to 5,015.16, as non-technology issues gained ground.

Experts noted market sentiment remained fragile as investors were reluctant to trade actively ahead of the long holiday. The market will be closed from Wednesday until Feb. 6 for the Chinese New Year holidays.

Meanwhile, prices ended slightly higher on the Singapore Stock Exchange. The key Straits Times Index, which lost 26.79 points during the previous session, added 0.7 percent to 1,340.16.

Elsewhere around the Pacific region, prices ended lower in light post-holiday trading on the Australian Stock Exchange. The blue-chip All Ordinaries Index, which added 2.30 points during Friday's session, fell 2 percent to 2,940.50. Markets in Sydney were closed on Monday for a national holiday.

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