Markets show signs of strength for past year

NEW YORK -- The flip-flops in stock prices this year make Wall Street look like a market in turmoil. But a step back from the daily gyrations shows that stocks actually have been holding their own in a wide trading range that extends back to last summer.

The Dow Jones industrials, for instance, have bobbled around in a 2,000-point span.

"Investors are more or less in pause mode," said Jack Caffrey, equities strategist at J.P. Morgan Private Bank. "There is not a great deal of conviction behind investors' moves."

Such lack of conviction has left the market's major indexes trading in ranges since last July, when they hit four- and five-year lows, although in October they sank a little further, to levels not seen in as much as six years.

The Dow has traded between the 7,300 and 9,300 levels, while the Nasdaq composite index has ranged roughly between 1,200 and 1,400 and the Standard & Poor's 500 index has largely fluctuated between 800 and 900.

Investors have been bidding stocks higher when economic and earnings reports were upbeat, only to resume selling when corporate outlooks and economic reports indicated business is still sputtering.

Seen in the context of the past few months, it's not surprising that the market had a big rally after New Year's only to give back all of its gains.

The market had ended June fairly optimistically, with the Dow at 9,243, the Nasdaq at 1,463 and the S&P 500 at 989. The three indexes continued their advance in early July, but by the 23rd, they tumbled, with the Dow at 7,702, the Nasdaq at 1,282 and the S&P 500 at 797 following a stream of disappointing earnings.

By Aug. 22, the Dow was back up to 9,053, the Nasdaq was at 1,422 and the S&P 500 had recovered to 962. There was another sharp drop in October, another comeback in November and more slippage in December before the rally that began Jan. 2 and ended at mid-month.

'Too oversold' for bears

Although investors want the market to break out of its range and start making real upward strides, analysts say they should take some heart in the fact that stocks are hanging in relatively well, and despite fears that a war with Iraq would further undermine the sluggish economy. It's not as if the market is falling to new lows every week.

"That is a positive. The market is too oversold for the bears to come in and really crush it," said Michael Murphy, head trader for Wachovia Securities. "But there is still enough uncertainty that people don't want to make big bets. That is why we are range bound."

Wall Street will be mired in a trading range until investors have a better sense of whether there will be war with Iraq, and if there is, what the outcome is likely to be. And, while the economy is improving, it's not going to make convincing progress until there's more certainty on the war front.

"Until Iraq is resolved ... I don't think the financial markets will reconnect with an economy that is expanding, albeit at a very slow pace," said Hugh Johnson, chief investment officer at First Albany.

Murphy said, "As long as (the indexes) stay within this range, it is fine. As long as they don't break down and can hold the lows, we are fine."

"There are a lot of reasons to dump stocks, but people aren't dumping stocks," he said.

Indeed, rather than sending stocks freefalling, investors have been mostly holding off on buying. The general belief is that there's still plenty of time to get into the market before it makes a definite move upward. Investors might be enticed by lower-priced stocks -- which feeds the market's periodic bouts of bargain-hunting -- but they also believe it is premature to start buying in earnest.

Murphy said: "It's better to be too late than too early. That is the ongoing theme here."

Wall Street's indexes suffered their fourth straight weekly declines. For the week, the Dow fell 189.58, or 2.4 percent. It closed Friday at 7,864.23.

The Nasdaq had a weekly loss of 38.44, or 2.9 percent, ending at 1,282.47 Friday. The S&P 500 index had a weekly decline of 26.01, or 3 percent, finishing at 829.69 Friday.

For the week, the Russell 2000 index, the barometer of smaller company stocks, fell 13.39, or 3.6 percent. It ended Friday at 358.78.

The Wilshire 5000 Total Market Index, which tracks more than 5,700 U.S.-based companies, ended the week at 7,873.42, down 251.65 from the previous week. A year ago, the index was at 10,249.32.