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Rally fizzles despite upbeat remarks from Greenspan
AP Business WriterNEW YORK (AP) -- Reassuring words from Federal Reserve Chairman Alan Greenspan gave the stock market a lift Wednesday, but the rally fizzled after an analyst lowered earnings estimates for Cisco, prompting nervous investors to collect profits.
The volatility, which left prices mixed, fit the pattern of recent weeks that has seen stocks advance and then fall back amid conflicting signs of economic recovery and corporate profitability.
"The market ran up a bit and people wanted to cash out," said Mark Vitner, an economist at Wachovia Securities. "That's the way it's been going for a while."
The Dow Jones industrial average was up nearly 140 points after Greenspan spoke to Congress, then fell into negative territory before recovering to register a gain of 12.32 to 10,127.58.
Broader stock indicators were mixed. The Standard & Poor's 500 index eked out a 0.51 gain to 1,109.89, while the tech-heavy Nasdaq composite was off 14.98 at 1,751.88.
Greenspan told Congress he sees increasing signs that the recession is coming to an end, although he cautioned that the recovery would not be robust.
Also Wednesday, the Commerce Department reported that factory orders for durable goods rose more than expected in January, the latest sign that the manufacturing sector might be pulling out of its slowdown.
Investors reacted to the news positively, then began selling after Stephen Koffler, an analyst at Wachovia Securities, lowered his estimate for Cisco System's third-quarter results to reflect continued cuts in capital spending by telecommunications service providers.
Cisco fell $1.26, or more than 8 percent, to $14.24.
Other high-tech companies also fell. Emulex dropped $3.48, or more than 9 percent, to $33.52. Sun Microsystems was off 35 cents at $8.66, while Intel was down 13 cents at $29.89 and Microsoft was down 16 cents at $58.39.
Alfred E. Goldman, chief market strategist at A.G. Edwards & Sons Inc. in St. Louis, pointed out that the market has been volatile in recent days.
It rose strongly on Friday and Monday, with the Dow chalking up an aggregate gain of 300 points. Then it dropped Tuesday and couldn't sustain a rise on Wednesday.
"In a correctional market, there's a very thin amount of confidence, and that's why you get these gyrations," he said. "Today, it sat at its highs for three hours, then gravity took over."
He noted that the caution about Cisco earnings pulled it down further.
Thomas Galvin, chief investment officer at Credit Suisse First Boston, credited the initial rally to "the combination of the durable goods orders ... and Greenspan's comments reflecting a benign interest rate policy or the likelihood any rate increases will be pushed back, not forward."
Still, he cautioned, investors likely would remain cautious until they see first-quarter profits reports, which should give some indication of the velocity of the economic recovery.
Financial stocks rose broadly on the good economic indicators.
Citigroup was up 44 cents at $44.24, while American Express rose 53 cents to $35.77.
The troubled biotech company ImClone surged on reports that the Food and Drug Administration might not require the company to make a new clinical trial for its cancer drug Erbitux.
ImClone rose $5.01 to $20.53. The stock had been badly beaten after the FDA declined to even review ImClone's application for Erbitux in December, saying crucial data were missing.
Bristol-Myers Squibb, which has a deal with ImClone to market Erbitux, also rose, gaining $1.98 to $47.49.
Clear Channel Communications fell $2.09 to $47.00 after the major radio broadcaster reported a sharply wider net loss for its fourth quarter due to acquisition related expenses.
Advancing issues outnumbered decliners 3 to 2 on the New York Stock Exchange. Trading volume was light at 1.38 billion shares, up from Tuesday's 1.31 billion.
The Russell 2000 index ended up 1.32 at 472.61.
Overseas, Japan's Nikkei stock average rose 3.63 percent. Germany's DAX index went up 1.28 percent, Britain's FT-SE 100 rose 0.77 percent, and France's CAC-40 climbed 1.93 percent.
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