June 29, 2003	Sunday	Rabi-us-Sani 28,1424

NEW YORK, June 28: Wall Street has soared in the first half of 2003 on the presumption of a strong second-half economic rebound. Now the second half is here, setting the stage for a crucial test.

In the week to Friday, the rally showed signs of fading. After four weeks of gains, the Dow Jones industrials slipped 2.30 in the week to 8,989.05.

The tech-heavy Nasdaq shed 1.18 per cent to 1,625.26 and the Standard and Poor’s 500 declined 1.96 per cent to 976.22.

Trading has been volatile, and the market was not relieved by the Federal Reserve’s quarter point rate cut, bringing the federal funds rate to 1.00 per cent, the lowest since 1958.

Year-to-date, however, the Dow is up 7.8 per cent, the Nasdaq 21.7 per cent and the S and P index 11 per cent. And from the March 11 low, the Dow is up 19.5 per cent, the Nasdaq is 27.9 per cent higher while the S and P has climbed 22 per cent.

Building on those gains will take strong growth, and analysts say that is not certain for the rest of the year.

Easy money, supported by falling interest rates, has been made, said Sung Won Sohn at Wells Fargo Bank. Now, the fun begins.

The extraordinary gains for the past quarter and the first half were predicated on a ramping up of US economic growth, which would lead to increased spending, business investment and profits, boosting the value of stocks.

John Silvia at Wachovia Securities, like many economists, is calling for growth of about 3.5 per cent following gains of 1.4 per cent in the first quarter and an expected gain of around 2.0 per cent in the second quarter, which ends Monday.

The reasons for our optimism are simple; the war is over, taxes have been cut and interest rates are at their lowest levels in decades, Silvia said.

The massive $350 billion tax cut, which becomes effective July 1, will pump tens of billions of dollars into the hands of consumers quickly, which should boost spending, accounting for two-thirds of US economic activity.

The tax cuts are probably the most important single factor in our more upbeat assessment, Silvia said. Assuming consumers spend as much of their take-home pay as they historically have, which conservatively is around 95 per cent of after-tax income, the tax cuts should boost second half GDP growth by around 0.8 percentage points.

But predictions have been made before.

FedEx dropped 0.75 per cent to 62.54 and Advanced Micro Devices declined 6.04 per cent to 6.38 in response to the earnings news of those groups.

Nike stumbled 5.25 per cent to 53.08 on disappointing earnings for the footwear giant and Palm was dragged down 2.87 per cent to 16.24 in the broader mearket despite a positive earnings surprise.

PeopleSoft, still battling the hostile takeover bid from rival software maker Oracle, rose 1.49 per cent to 17.68. Oracle dropped 3.86 per cent to 12.43 and J.D. Edwards, which is seeking to merge with PeopleSoft, added 1.35 per cent to 14.22.—AFP