- The Washington Times - Wednesday, July 9, 2003

NEW YORK (AP) — Wall Street pulled back yesterday as investors cashed in profits from the market’s recent rally while awaiting second-quarter earnings reports. Fears of a potentially unfavorable legal ruling against Altria Group also weighed on shares.

“It’s an earnings game from here on out,” said Mike Kayes, chief investment officer at Eastover Capital in Charlotte, N.C. “We’ll be in for some choppy days until we have a clear direction on what earnings might look like.”

The Dow Jones Industrial Average closed down 66.88, or 0.7 percent, at 9,156.21, after a two-day gain of 152 points.

The broader market finished mixed. The Nasdaq Composite Index inched up 1.00, or 0.1 percent, to 1,747.46, having advanced 83 points this week to reach its highest level in nearly 15 months.

The Standard & Poor’s 500 Index declined 5.63, or 0.6 percent, to 1,002.21, after a two-day gain of 22 points.

Dow component Altria Group slid $2.77, or 5.9 percent, to $44 on speculation that an Illinois appellate court might overturn a lower court’s decision to cut the amount of bond the parent of Philip Morris needed to appeal a $10.1 billion tobacco verdict.

A government report showing an unexpected drop in wholesale inventories also pressured stocks. The Commerce Department reported that inventories fell 0.3 percent in May to a seasonally adjusted level of $289.34 billion. Economists had predicted a 0.1 percent rise.

While stocks have rallied in recent months, investors are eagerly looking to second-quarter earnings for more solid proof that the economy is rebounding.

Analysts said an absence of significant positive news also prompted many investors to sell, unlike the string of merger announcements Tuesday that helped the Dow overcome early losses to close modestly higher.

“The biggest question is whether technology will continue to lead and earnings will accelerate,” Mr. Kayes said. “Investors are holding their breath until that occurs. … Investors are wondering, ‘Do we jump into tech stocks now given the big advance or sell them if earnings don’t go through?’”

Barry Berman, head trader for Robert W. Baird & Co. in Milwaukee, agreed.

“The general feeling is that a lot of things are in place to get the market going — interest rates are low, and we have a tax [cut] package,” he said. “The market in general is digesting the big run-up that we’ve had, looking at second-quarter earnings and waiting for the next big significant news.”

Tenet Healthcare slipped 5 cents to $12.10 after the hospital chain said it had received a civil subpoena from the Securities and Exchange Commission indicating a formal investigation; the SEC had been informally reviewing the company’s Medicare charges since November.

Alcoa fell 34 cents to $25.47 although the Dow component reported second-quarter earnings that beat estimates of analysts by 3 cents per share; Morgan Stanley, meanwhile, cut the company’s stock rating to “equal-weight” from “overweight.”

Gainers included Citigroup, which rose 62 cents to $45.99, after Prudential raised the bank’s stock rating to “hold” from “sell.”

Declining issues outnumbered advancers 5-to-4 on the New York Stock Exchange. Volume was moderate at 1.57 billion shares, compared with 1.55 billion traded Tuesday.

The Russell 2000 index, which tracks smaller-company stocks, rose 3.02, or 0.6 percent, to 476.99.

Overseas, Japan’s Nikkei stock average finished 0.9 percent higher yesterday. In Europe, France’s CAC-40 fell 1.2 percent, Britain’s FTSE 100 lost 0.5 percent and Germany’s DAX index declined 0.7 percent.

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