- The Washington Times - Tuesday, June 17, 2003

NEW YORK (AP) — Wall Street managed slight gains on reports of modest economic improvement yesterday as investors battled a temptation to cash in profits from Monday’s rally.

Analysts said a report showing a rise in consumer prices worried some investors who were counting on the Federal Reserve to cut interest rates by a half-point. But mostly, investors were being cautious after three months of advances.

“I think the CPI number took some people by surprise. It maybe has the market thinking the Fed might be a little less aggressive at the end of the month,” said Dennis Ferro, chief investment officer of Evergreen Investments, referring to the Labor Department’s Consumer Price Index.

“The market has run a long way and was due for a pause,” he added. “I think the market is at a point where all the hopes for the second half of the year in economic growth and earnings improvement now need to be validated.”

The Dow Jones Industrial Average closed up 4.06, or 0.04 percent, at 9,323.02, having gained 201 points Monday to its highest level since July 2002.

The broader market also edged higher. The Nasdaq Composite Index rose 1.86, or 0.1 percent, to 1,668.44. The Standard & Poor’s 500 index inched up 0.92, or 0.1 percent, to 1,011.66.

The Labor Department said its Consumer Price Index, a barometer of inflation, was unchanged in May, an improvement from April’s 0.3 percent decline. The reading allayed fears of deflation, although it stirred concern among those expecting an interest-rate cut. Economists predicted the CPI would fall 0.1 percent.

“There was no convincing data on the economic side,” said Chris Wolfe, equity market strategist for J.P. Morgan Private Bank.

Mr. Wolfe said many investors were holding off on making major stock purchases as the second-quarter earnings season approaches. “At the end of the day, it’s hard to fathom the trend is anything than a circling pattern around second-quarter earnings,” he said.

Mr. Ferro agreed. “If we come through the next three to four weeks with a reasonable earnings-reporting period, that will set the stage for the market to move higher,” he said.

Circuit City gained 92 cents, or 13.4 percent, to $7.79 after the electronics retailer posted a loss that was narrower than expectations.

Microsoft rose 57 cents to $25.96 after West Virginia settled its antitrust claims against the software company. Lehman Brothers also said the company’s stock might be overdue for a rally.

Pfizer advanced $1.58 to $36.18 after the drug company issued a full-year outlook that was higher than analysts’ estimates.

Losers included Dow component AT&T;, which fell $1.01 to $20.05, after a Merrill Lynch analyst downgraded the telecommunications company’s stock to “sell” from “neutral,” citing weak business prospects in the coming years.

Coca-Cola dropped $1 to $47.20 after the soft-drink giant said the Securities and Exchange Commission was investigating an employee’s accusations of fraudulent sales claims.

Declining issues narrowly outnumbered advancers on the New York Stock Exchange. Consolidated volume was moderate at 1.87 billion shares.

Overseas, Japan’s Nikkei stock average finished 2.2 percent higher yesterday. France’s CAC-40 advanced 0.8 percent, Britain’s FTSE 100 rose 0.9 percent and Germany’s DAX index gained 0.7 percent.

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