Posted at 1 p.m., Friday, August 10, 2001
Blue chips climb; analysts remain wary of economy
Associated Press
• Hawai'i Stocks
• Updated Market Chart
NEW YORK — Blue chip stocks rose today after a government report indicated inflation appears under control, but analysts warned that the big advance doesn't mean Wall Street has suddenly become optimistic about an economic turnaround.
According to preliminary figures, the Dow Jones industrial average closed up 117.69 at 10,416.25, rebounding after traders sent it down 101 points earlier in the session.
Broader stock indicators were mixed. The Standard & Poor's 500 index climbed 6.73 to 1,190.16, but the Nasdaq composite index was down 6.85 at 1,956.47.
Although the inflation report sets the stage for further Federal Reserve interest cuts later this year, investors still have pervasive concerns about how long it will take for an economic recovery that would help companies deliver better returns to shareholders.
Analysts cautioned that market upticks like the Dow's rise today are usually erased within days.
"I think the glaring question and ambiguity surrounding the market is when the economy is going to bottom," said Brian G. Belski, fundamental market strategist at US Bancorp Piper Jaffray. "They're not seeing a bottoming taking place yet."
Investors are locked into a mindset where buying enthusiasm is rare, and short-lived when it occurs, said William Barker, investment strategy consultant at Dain Rauscher in Dallas.
The Labor Department reported wholesale prices dropped 0.9 percent in July, the best inflation performance in eight years. Gasoline and other energy products posted big declines.
Excluding volatile energy and food prices, the "core" rate of inflation edged up by 0.2 percent in July following a tiny 0.1 percent rise, suggesting most other prices remained well-behaved.
The Fed has cut interest rates six times this year, and most economists expect an additional quarter-point rate cut when policy-makers meet Aug. 21.
Most experts believe the rate cuts will eventually help the economy, but some doubt they will provide a jump start.
"We think the Fed's moves will serve to act as a cushion for the economy," said Scott Bleier, chief investment strategist at Prime Charter Ltd. "But the market needs time. We're still living in a post bubble economy that's slowly easing."
Dow component General Electric rose 67 cents to $42.57, while Exxon, another Dow stock, was up 40 cents at $41.35.
Philip Morris fell 38 cents to $44.11. That came a day after a judge reduced a record $3 billion damage award against the tobacco giant to $100 million.
US Airways, meanwhile, dropped 3 cents to $18.25 after the company said it expects wider losses in the third quarter as lower business travel and price pressure in a slower economy continues to bruise the airline industry.
And shares in cellular therapy companies fell sharply today after President Bush announced yesterday he would approve federal funding for only limited projects.
The companies "are not going to get all the money they thought they were going to get," said Barker, the Dain Rauscher, analyst. "They were thinking they would get a lot more."
Geron, the leading human embryonic stem cell company, fell 99 cents, or 6.6 percent, to $13.95.
Even stocks of companies that work exclusively with noncontroversial adult stem cells suffered in the wake of President Bush's decision.
Aastrom Biosciences fell 43 cents, or 19.1 percent, to $1.82, while Stem Cells Inc. dropped $1.61, or 25 percent, to $4.84.
Advancing issues outnumbered decliners 3 to 2 on the New York Stock Exchange, where volume came to 946.83 million shares, down from 1.1 billion yesterday.
