Stocks drift down on profit-taking despite good economic news

AP Business WriterNEW YORK (AP) -- Wall Street played it safe Thursday, pausing for mild profit-taking even as more evidence of a recovering economy flowed in.

Analysts said investors, while increasingly optimistic that a turnaround is beginning, are not convinced the market's rally will last. Investors were also concerned that a positive assessment of the economy by Federal Reserve Chairman Alan Greenspan might signal higher interest rates.

The Dow Jones industrial average closed down 48.92, or 0.5 percent, at 10,525.37, according to preliminary calculations, losing some ground from a 140-point gain Wednesday. The blue chip indicator had posted triple-digit gains in three out of the previous four sessions.

Broader stock indicators also fell. The Standard & Poor's 500 index slipped 5.23, or 0.5 percent, to 1,157.54. The Nasdaq composite index finished down 8.77, also 0.5 percent, at 1,881.63.

"We're seeing some selling, but by and large this is just profit-taking," said Richard A. Dickson, technical analyst at Hilliard Lyons. "There doesn't seem to be any serious underlying problem in the market today. People are just thinking the last couple of days have been pretty good and maybe we should take our profits now, so that if stocks fall back, we won't lose out."

Indeed, after an early uptick, blue chips turned lower as investors collected gains from the sizable advances that had pushed the Dow to its highest level since mid-July.

Financial and manufacturing stocks, which had enjoyed some of the biggest gains in recent sessions, struggled. American Express dropped 23 cents to $39.69, while 3M lost $1.57 to $120.

Conseco tumbled 26 cents to $3.49 after Merrill Lynch cut its rating on the insurer to "reduce/sell," a day after Conseco's financial officer stepped down and Moody's Investors Service questioned whether Conseco can generate enough cash to pay its debt.

And Boeing slid $2.22 to $47.64 although South African Airways decided to purchase 41 aircraft from rival Airbus.

But several retailers were higher, lifted by better-than-expected February sales. J.C. Penney advanced $1.93 at $21.12.

Tech stocks were also mixed. Gateway rose 20 cents to $5.50, while competitor Dell dropped 35 cents to $27.59.

Intel rose 2 cents to $32.98 ahead of a mid-quarter earnings update expected after the market closed. A bullish forecast from the tech bellwether could help stocks end the week on a high note.

Wall Street was both encouraged and unnerved by Greenspan's testimony before the U.S. Senate that a recovery is "already well under way" -- his most upbeat comments about the economy in a year. Although investors want to hear that conditions are improving, they don't like the prospect of higher interest rates.

The Fed lowered rates 11 times in 2001 to stimulate growth; the concern is that the central bank might view a health economy as reason to start increasing them again.

"Greenspan was probably more bullish than people thought he would be. That led people to believe that in the short run at least, he might be more likely to rise interest rates," said John Forelli, portfolio manager for Independence Investment LLC. "It's our belief, though, that that won't happen before the fourth-quarter, and is not something that will happen in the next month or anytime soon."

Investors showed little reaction to a Labor Department report showing new unemployment claims fell last week, continuing a steady decline.

Advancing and declining issues traded nearly evenly the New York Stock Exchange. Volume came to nearly 1.50 billion shares, up from 1.52 billion Wednesday.

The Russell 2000 index rose 0.12 to 494.92.

Overseas, Japan's Nikkei stock average jumped 2.6 percent. In Europe, Germany's DAX index gained 0.1 percent, Britain's FT-SE 100 rose 0.7 percent, and France's CAC-40 climbed 0.6 percent.

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