Posted at 11:35 a.m., Thursday, July 22, 2004
Stock market sluggish in uncertain economy
By Meg Richards
Many companies have reported strong earnings for the second quarter, indicating business conditions are good, but investors have focused instead on lower forecasts and worries about whether future earnings can support current share prices. Some analysts have attributed the current pattern of sideways trading to summer doldrums, while others express concern that selling pressure could increase if the downward trend continues.
"The fear of earnings not holding up in the second half of the year has put the bears in full control, and the market is basically testing the trading ranges," said Peter Cardillo, chief strategist with S.W. Bach & Co. "Any close under the 10,000 level (on the Dow) will obviously indicate a psychological breakdown, and could induce more selling."
According to preliminary results, the Dow Jones industrial average ended the day higher, up 4.20, or 0.04 percent, at 10,050.33 after falling as low as 9,946.88. The Dow last closed below 10,000 on May 24.
The broader gauges also finished higher after spending much of the session in a negative range. The Nasdaq composite index gained 14.69, or 0.8 percent, to 1,889.06, ahead of much-anticipated results from Microsoft Corp. The Standard & Poor's 500 index added 2.96, or 0.3 percent, to 1,096.84.
The S&P 500 hit a milestone yesterday, when it fell below its 200-day moving average for the first time since March 2003. That was a caution flag, suggesting the upward trend that began more than a year ago might not be sustainable.
Helping the bears' case, a closely watched gauge of future economic activity declined for the first time since March 2003. The Conference Board said its Composite Index of Leading Economic Indicators dropped 0.2 percent in June, to 116.2, following three months of gains.
With no real catalyst in sight to push the markets higher, many analysts believe there are more down days ahead for the equity markets.
"I wouldn't expect we're going to see huge moves to the upside until we get the election behind us," said Thomas F. Lydon Jr., president of Global Trends Investments in Newport Beach, Calif. "We're below the 200-day average on the S&P 500, we're seeing some big companies have disappointing earnings, we're going into these summer doldrums ... It really doesn't make the average investor feel like they want to push more money into the market. They're just making the choice that 'I'm going to sit this one out for a while.' "
Decliners outnumbered advancing issues by more than 3 to 2 on the New York Stock Exchange. Volume was moderate.
The Russell 2000 index, which tracks smaller company stocks, was down 2.05, or 0.4 percent, at 546.52.