- The Washington Times - Wednesday, January 29, 2003

NEW YORK, Jan. 29 (UPI) — Share prices on the New York Stock Exchange and the Nasdaq Stock Market ended slightly higher Wednesday, as investors shrugged off comments from President George W. Bush late Tuesday to brace Americans for a possible war with Iraq, and as they bargain hunted.

The Dow Jones industrial average gained 21.87 points, or 0.27 percent, to close at 8,110.71. The Nasdaq composite index ended 15.93 points, or 1.19 percent, stronger at 1,358.11. The broader New York Stock Exchange composite index gained 25.79 points to 4,866.78, while the Standard & Poor's 500 index rose 5.88 points to 864.42. The American Stock Exchange composite index gained 6.48 points to 810.02, while the Wilshire 5000 Index increased by 52.80 points to 8,195.38.

Big Board volume reached an estimated 1.58 billion shares, while volume on the Nasdaq was at an estimated 1.49 billion shares.

High-tech shares were some of the most popular in Wednesday's trading, and demand for tech stocks offset market languidness about the Federal Reserve's decision to keep interest rates steady. The Fed announced in early afternoon that it would keep the federal funds target rate unchanged at 1.25 percent, leaving rates at their lowest level in over four decades.

The Fed did, however, caution against downside risks, particularly the potential U.S. attack on Iraq, as well as higher oil prices and continued weakness in the labor market.

Meanwhile, investors digested Bush's State of the Union address indicating the country is one step closer to war. Although the president dealt with a variety of issues in his speech, the dominant topic was Iraq, as Bush spelled out what he sees as the threat that Iraqi leader Saddam Hussein poses to the world.

He demanded that Saddam come clean on weapons of mass destruction and attempted to link the Iraqi leader with the terrorist threat that has been close to the nation's heart since the Sept. 11, 2001, attack.

Bush also said that Secretary of State Colin Powell would appear before the United Nations next Wednesday to press the case for war. U.N. weapons inspectors are due to give a follow-up report Feb. 14, and increasingly the market is viewing that as the point of no return.

On the corporate front, the earnings season continues, and market players will look for more clues on the outlook for businesses. Although many companies this season have reported earnings in-line with expectations, their profit outlooks have been mixed.

Meanwhile, U.S. Treasury prices drifted lower. The 10-year bond eased 14/32 to 99 26/32. Its yield, which moves in the opposite direction of its price, rose to 4.02 percent from 3.97 percent late Tuesday.

In Europe, stock prices ended fractionally lower in London and Frankfurt but rose in Paris in moderate trading. The London International Stock Exchange's blue-chip FTSE-100 index lost 23.8 points to 3,466.2. The German DAX index dipped 0.42 point to 2,670.94 and the French CAC-40 index rose 39.98 points to 2,840.05.

Analysts said British and German shares were pressured as investors continued to worry about the consequences of U.S.-led war against Iraq, the weaker dollar and whether the global economy will recover this year. The French market pushed higher late in the session, recovering from opening losses as the recent slide in equities drew a tentative round of bargain hunting.

German stocks were also pressured after the German government cut its 2003 economic growth forecast, making it increasingly likely that Europe's largest economy will breach the European Union's budget deficit rules for the second year in a row. The Social Democratic-led government as expected lowered its growth outlook to 1 percent from 1.5 percent growth predicted in October. The is roughly in line with the predictions of local economic research institutes, though one is forecasting growth of as little as 0.6 percent. The revision showed that slowing global economic growth has had a stronger impact on the German economy than previously expected.

The government also repeated its commitment to balance the nationwide budget by reducing borrowing. The reduced growth outlook, however, casts doubts on whether Germany will be able to deliver it promise to keep the deficit below the EU-imposed ceiling of 3 percent. This is because the 2.75-percent deficit target was based on the twin assumptions of 1.5-percent economic growth and the successful passage of a package of tax hikes — something that is becoming increasingly unlikely.

In Asia, prices on the Tokyo Stock Exchange ended lower for a fourth consecutive session, pressured by concerns over corporate earnings. The blue-chip Nikkei Stock Average, which fell 84.08 points Tuesday, lost another 194.31 points, or 2.3 percent, to 8,331.08. The benchmark index closed just above its 19-year closing low of 8,303.39 set back on Nov. 14, 2002.

Analysts said stocks ended lower as more unwinding of cross-held shares by Japanese companies sent stocks such as Fujitsu and Toshiba tumbling.

Experts said news during the session provided little incentive to reverse the market's fall. The government reported before the market opened that industrial output for December fell the fourth month in a row, and Bush's State of the Union address did little to allay fears of an impending war with Iraq.

As cross-held shares were unwound, speculators, including hedge funds, joined in the sell off, accelerating the pace of the Nikkei's decline, traders said.

Quarterly earnings from Toshiba during the day gave market players an opportunity to trade. As expected, Toshiba reported a much smaller net loss for the October-December quarter than the year before as well as a return to profitability at the operating level, but that could not save the company's stock from slipping. Toshiba fell 4.3 percent.

Fujitsu dropped 8.7 percent on selling mainly from foreign securities houses, after the company reported sluggish October-December results. Fujitsu only cut its revenue outlook slightly despite analysts' expectations for a broader downward earnings revision.

Prices ended lower in moderate trading on the Hong Kong Stock Exchange, pressured by Bush's comments. The blue-chip Hang Seng Index, which rose 26.93 points during the previous session, fell 84.81 points, or 0.91 percent, to 9,240.79.

Prices also ended lower on the South Korean Stock Exchange. The Korea Composite Stock Price Index, or Kospi, which rose 7.47 points during the previous session, dropped 17.21 points, or 2.9 percent, to 583.35.

Meanwhile, prices ended at their lowest level in 16 months on the Singapore Stock Exchange. The key Straits Times Index, which added 8.44 points during the previous session, dropped 36.84 points, or 2.8 percent, to 1,302.85.

Prices also ended lower in cautious trading on the Australian Stock Exchange. The blue-chip All Ordinaries Index, which dropped 59.60 points during the previous session, lost another 10.60 points, or 0.4 percent, to 2,929.90.

Meanwhile, the Taiwan Stock Exchange was closed Wednesday for the long Chinese New Year holidays. The market will remain closed until Feb. 6 after the Weighted Index rose 42.57 points to 5,015.16 during Tuesday's session.

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