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Posted at 12:01 p.m., Wednesday, December 3, 2003

Cautious investors halt Nasdaq's climb

Hawai'i Stocks
Updated Market Chart

By Hope Yen
Associated Press

NEW YORK — The Nasdaq composite index flirted with 2,000 for the first time in nearly two years today and the Dow Jones industrials approached the 10,000 level as investors eagerly picked up stocks but then grew cautious following a strong productivity report.

The high-tech dominated Nasdaq reached 2,000 and the Dow came within 58 points of 10,000 in the early afternoon before both indexes retreated and closed mixed. Analysts said investors were optimistic but choosing to take their time in sending stocks significantly higher.

"Folks are really starting to believe in the sustainability of the economic recovery," said Richard J. Nash, chief market strategist at Victory Capital Management. "The productivity numbers were just spectacular" and should bring "another good surge in corporate profits."

"The economic data is so encouraging, folks still want to get involved in the market," he said.

The Nasdaq rose as high as 2,000.92 before falling back to 1,960.25, down 19.82, or 1 percent. The index, which suffered the worst losses during the bear market of the past few years, had not traded above 2,000 since Jan. 15, 2002.

The Dow, meanwhile, closed up 19.78, or 0.2 percent, at 9,873.42. Earlier in the day, the blue chip average rose as much as 88 points to reach 9,942.01. The last time the Dow traded above 10,000 was May 31, 2002.

The Standard & Poor’s 500 index fell 1.89, or 0.2 percent, to 1,064.73.

The Nasdaq’s return to 2,000 was a significant step in the stock market’s recovery from the heavy losses that followed the dot-com bust, recession and corporate ethics scandals of recent years. But the index still remains well below its record close of 5,048.62, reached March 10, 2000.

Today’s gains followed a Labor Department report that U.S. productivity shot up at a 9.4 percent annual rate in the third quarter. It was the best reading in 20 years and better than economists’ forecasts as well as the 8.1 percent rate initially estimated by the department a month ago.

A report on U.S. service sector growth was weaker than expected, however. The Institute for Supply Management said its index of business activity in the non-manufacturing sector stood at 60.1 in November, compared to 64.7 in October, according to Dow Jones Newswires. It was the slowest rate of growth since May; it also fell below analysts’ estimates of 64.5.

Stocks have risen in recent days, partly on investor optimism for a stronger economy. December also is typically strong for stocks as investors put year-end bonuses and dividends to work, although some analysts wonder if shares have risen much too far, too fast.

Russ Koesterich, U.S. equity strategist at State Street Corp. in Boston, said crossing the Nasdaq 2,000 and Dow 10,000 barrier represents somewhat of a psychologically breakthrough for investors.