- The Washington Times - Wednesday, September 8, 2004

NEW YORK (AP) — Investors adopted a wait-and-see attitude on the economy, despite Federal Reserve Chairman Alan Greenspan’s improved assessment, and bid stocks modestly lower yesterday as Wall Street waits for better economic and earnings news.

Although Mr. Greenspan said the economy has “regained some traction” after the summer’s slowdown, investors looked past his congressional testimony and focused on uncertainty about the health of the economy, third-quarter earnings pre-announcements and fiscal policy.

Mr. Greenspan gave no strong indications about whether the Fed would raise interest rates at its meeting on Sept. 21. Although many analysts think a quarter-percentage point increase is likely, others wonder whether election-year politics will cause the Fed to put off a rate increase until November. The benchmark rate stands at 1.5 percent.

“Between the economy the way it is and the election coming up, I don’t think the Fed will raise rates this month,” said David Legeay, senior vice president at McDonald Financial Group. “It’s still a show-me recovery, and a lot of businesses are waiting to see how the economy fares and what the Fed will do before they make any big investments.”

The Dow Jones Industrial Average fell 29.43, or 0.3 percent, to 10,313.36.

Broader stock indicators also were lower. The Standard & Poor’s 500 index was down 5.03, or 0.4 percent, at 1,116.27, while the Nasdaq Composite Index dropped 7.92, or 0.4 percent, or 1,850.64.The Russell 2000 index of smaller companies was down 5.17, or 0.9 percent, at 557.76.

With terror fears fading after the close of the political conventions and oil prices on the decline, investors are firmly focused on economic numbers, with an eye toward how the Fed will interpret the data when it looks at interest rates.

Third-quarter earnings likely will be reduced because of the summer’s high oil prices. So the market has mostly discounted the upcoming earnings season — even though double-digit profit growth is still likely. The hope is for a resurgence in profits in the fourth quarter to go along with the elections and more strength in the economy.

“Clearly, everyone wants to know what the catalyst is going to be to send this market higher,” said Brian Belski, market strategist at Piper Jaffray. “One, we now have a lack of negative news of the kind that impacted the market over the summer. But more importantly, we’ve been increasingly conservative on earnings growth estimates, and those numbers will have to start going up if we’re going to rally.”

Despite his cautiously optimistic assessment, Mr. Greenspan echoed Wall Street’s concerns over oil prices, which have fallen from record highs in recent weeks but stubbornly remain higher than $40 per barrel. A barrel of light crude for October delivery was quoted at $42.77, down 54 cents, on the New York Mercantile Exchange.

Dow component Coca-Cola Co. dropped $2.20 to $43.45 after its chief bottler, Coca-Cola Enterprises Inc., issued warnings over its third-quarter earnings and reduced its full-year outlook because of lower demand for the company’s soft drinks. Coca-Cola Enterprises fell $1.11 to $19.48.

Shares in Wal-Mart Stores Inc. fell 21 cents to $53.08 after the retailer’s chief executive officer told an investing conference that Christmas sales would likely meet expectations.

Fast-food chain McDonald’s Corp. said sales from stores open at least a year rose 3.9 percent in August, citing improved services and more menu options. McDonald’s gained 12 cents to $27.50.

Dean Foods Corp. tumbled $6.73 to $30.40 after cutting its outlook for the quarter and the year, citing competition and rising costs for milk, fuel, resin and other commodities.

McKesson Corp. fell 15 percent, or $4.85, to $26.98, after the pharmaceutical distributor warned that its earnings for the quarter would fall short of expectations because of fewer drug prices increases.

Declining issues outnumbered advancers by about 3 to 2 on the New York Stock Exchange, where volume came to 1.25 billion shares compared with 1.21 billion on Tuesday.

Overseas, Japan’s Nikkei stock average closed down 0.2 percent, France’s CAC-40 fell 0.1 percent, Britain’s FTSE 100 closed down 0.2, and Germany’s DAX index dropped 0.1 percent.

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