Posted at 12:30 p.m., Monday, June 4, 2001
Investors tentative amid lingering fears
Associated Press
NEW YORK — Caution asserted itself on Wall Street today as investors, still nursing doubts about when the economy will improve, bought stocks but made few major commitments.
Blue chips managed a moderate rally on gains in a handful of energy and technology issues, but the overall market was less robust in an unusually quiet and choppy session.
The Dow Jones industrial average closed up 71.24 at 11,061.65, according to preliminary calculations.
Broader indicators recorded more modest advances. The Standard & Poor's 500 index rose 6.44 to 1,267.11, and the Nasdaq composite index advanced 6.49 to 2,155.93.
It was the third straight gain for all three indexes, but analysts weren't impressed. The advances amounted to less than 1 percent on each indicator and the Nasdaq Stock Market and New York Stock Exchange, according to early figures, were on track to record their lightest volume days of the year.
"Overall, what you're seeing here is a rally in a few high-priced Dow stocks, but not any kind of a broader, more powerful move on the larger market," said Richard Dickson, technical analyst at Hilliard Lyons. "I think investors are still confused about the earnings outlook and what's going on with technology. There are not a lot of compelling reasons to buy, but there are a lot of reasons to be cautious."
That reluctance spilled over to the technology sector, making for a mixed session. IBM rose 75 cents to $113.64, while Intel fell 24 cents to $28.50 on worries the chip maker will issue an earnings warning at a mid-quarter update scheduled for later this week.
Oil and pharmaceutical components were stronger. ExxonMobil gained $1.88 to $90.83 as part of a broader sector move on concerns about energy prices and world oil supplies, while Johnson & Johnson rose $2.14 to $100.14.
Investors have been skittish in recent weeks on concerns that a widely anticipated fourth-quarter recovery for corporate profits might not happen. The market rallied strongly in April and early May on that hope, but a mix of conflicting economic data and earnings warnings since then have unnerved investors.
Adding to those worries are the second-quarter earnings due out in a few weeks. Those results are expected to be disappointing, but the murky economy outlook has intensified worries that more companies than expected will warn of weak returns. The tech sector is considered especially vulnerable.
"It's the calm before the storm of second-quarter earnings and people are battening down the hatches," said Tom Galvin, chief investment officer at Credit Suisse First Boston. "People aren't expecting much in the way of good news, so that's keeping buyers on the sidelines."
Wall Street appeared unsure of how to react to a statement by Federal Reserve Chairman Alan Greenspan that he was encouraged by signs that U.S. gasoline prices might decline, but that the Fed is keeping a close watch for signs of potential inflationary pressures.
Concerns about inflation could prompt the Fed to be less aggressive in cutting interest rates. The agency has cut rates five times already this year, and investors are counting on more reductions to stimulate the economy. The Fed's next meeting starts June 26.
Advancing issues led decliners nearly 2 to 1 on the NYSE.
