Stocks mixed following fed decision on interest rates

AP Business WriterNEW YORK (AP) -- Choosey bargain hunters surfaced Tuesday on Wall Street, bidding blue chips higher following an extended sell-off that had sent stocks to their lowest levels in months. But technology stocks fell for the fifth straight day.

The market ended narrowly mixed, pulling back from a stronger, universal upturn from earlier that was fueled by stronger-than-expected worker productivity numbers. Wall Street retreated after the Federal Reserve announced that it was leaving interest rates unchanged.

"This was pretty much as expected, and so the market certainly did not sizzle. ...The real issue at the moment seems to be just how long it will take until the economic recovery gets under gear. Until then, it seems the Fed at least is not going to raise rates until August or September," said Alan Ackerman, executive vice president of Fahnestock & Co.

The Dow Jones industrial average closed up 28.51, or 0.3 percent, at 9,836.55, giving up an earlier gain of 110.92, according to preliminary calculations. The Dow on Monday tumbled 198.59 to its lowest close since Feb. 19.

But the broader market gave up its advance and finished lower. The Nasdaq composite index fell 4.66, or 0.3 percent, to 1,573.82, after rising as much as 16.09.

The Nasdaq has fallen for five straight sessions, sliding 159.66 and trading at levels not seen since early October. Tuesday marked the Nasdaq's 13th losing session out of the last 15.

The Standard & Poor's 500 index declined 3.18, or 0.3 percent, to 1,049.49, having gained 6 points earlier. The S&P lost 20.76 Monday.

While the Fed's decision was what the market expected, it still soothed investors' fears that interest rates could increase before the economy has markedly improved.

The Fed, which lowered rates 11 times last year to stimulate growth, said the economy has been receiving "considerable upward impetus" from slower inventory liquidation by businesses. But it's still uncertain how much demand from consumers and companies is strengthening.

Overall, investors got what they what they wanted from the Fed, which was some "confidence that the recovery is gaining traction but at the same time, no raise in rates," said John C. Forelli, portfolio manager for Independence Investment LLC in Boston.

But other analysts attributed the bulk of the market's advance to a positive economic report from the Labor Department, which said worker productivity rose at an annual rate of 8.6 percent in the first quarter. Analysts were expecting a 7 percent gain.

"The major event of the day were the productivity figures, which were very positive," Forelli said.

The technology sector stumbled, showing its vulnerability to investors' growing fears that it might not experience a business turnaround until late this year at the earliest.

Dell Computer fell $1.42 to $22.33, while PMC-Sierra declined 46 cents to $12.99.

But Cisco Systems advanced 19 cents to $13.08 ahead of its fiscal third-quarter earnings due later Tuesday.

Dow industrial Hewlett-Packard gained 19 cents to $18.41 after Morgan Stanley raised its rating on the printer maker's stock to "over-weight" from "equal-weight."

Blue chips managed widespread gains, thanks to their reputation for being havens in bearish markets. Honeywell climbed $1.80 to $37.80, Wal-Mart advanced $1.02 to $55.01, and United Technologies rose 81 cents to $68.15 after reaffirming its 2002 earnings outlook. All three are Dow industrials.

Analysts expect the market to trade within a narrow range for the next few weeks following the big sell-off and as investors await companies' second-quarter outlooks.

Investors have been selling stocks for weeks as companies released tepid first-quarter earnings results and failed to offer upbeat forecasts. With the timing of a rebound in profits still murky, stock prices are too high, analysts said.

"Now that most earnings reports are behind us, the market continues to be spooked by high valuation and an economy that appears to be less robust at this point," Ackerman said.

Declining issues outnumbered advancers slightly more than 8 to 7 on the New York Stock Exchange. Volume was moderate.

The Russell 2000 index, the barometer of smaller company stocks, fell 3.93, or 0.8 percent, to 498.98.

Overseas, Japan's Nikkei stock average finished Tuesday down 2.0 percent. In Europe, Germany's DAX index declined 0.2 percent, while France's CAC-40 and Britain's FTSE 100 each dropped 1.6 percent.


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