July 20, 2003	Sunday	Jumadi-ul-Awwal 19, 1424

NEW YORK, July 19: After a flood of corporate earnings reports and a guardedly optimistic outlook from Fed chairman Alan Greenspan, Wall Street is no longer sure which way is up.

The Dow Jones industrials gained 0.75 per cent in the week to Friday to end at 9,188.15 but the tech-heavy Nasdaq composite fell 1.47 per cent to 1,708.50.

The broad-market Standard and Poor’s 500 index fell 0.48 per cent to 993.32.

The market has been on a four-month uptrend, but traders are unsure whether the momentum can be sustained without a strong acceleration in economic growth.

Greenspan, who appeared before Congress Tuesday and Wednesday, offered encouragement to equity markets by signaling the Fed was prepared to keep rates low in supporting economic growth.

But his comments did little for stocks, while punishing bonds.

The yield on the 10-year Treasury bond soared to 3.969 per cent from 3.640 per cent a week earlier and that on the 30-year bond to 4.911 per cent fro 4.684 per cent. A rise in yields reflects a drop in bond prices.

While he (Greenspan) stated emphatically that the central bank would maintain a low interest rate environment ‘as long as needed’ to ensure economic recovery, he noted that there was little, if any, need for the Fed to use non-conventional tools, such as buying long Treasury bonds, to offset deflationary trends that were not present, said Doug McAllister at Prudential Securities.

The sharp spike in bond yields meanwhile sent ripples across Wall Street, amid concerns that rising interest rates could crimp the fragile US economic recovery.

That’s the uncertainty that is vexing investors, said Steven Narker at Merrill Lynch.

Our sense is that they are waiting to see if interest rates settle into a comfort zone, one that isn’t high enough to smother an economic upturn and isn’t low enough to signal that the economy is in danger of backsliding into stagnation, another recession, or a pernicious Japanese-style deflation.

The spate of earnings reports have been generally good, although companies have expressed caution over whether the trend can be sustained.

The market was especially troubled by the weak forecast from tech bellwethers IBM and Nokia, but took some comfort from a strong report later in the week from Microsoft.

The reports have so far haven beated Wall Street estimates in most cases, but they give no evidence things are starting to pick up, said Sung Won Sohn at Wells Fargo Bank.

Ralph Acampora said that but that stocks may pull back after strong gains of the past four months, but expects the rally to resume.

We anticipate that further corrective activity could be seen over the next week or so. This behavior is not expected to impact our longer-term bullish outlook and is considered part-and-parcel of a move which has registered hefty gains since the March lows, he said.

In sum, a much needed correction appears to be running its course.

Among active shares in the past week, Caterpillar tallied a 14.34 per cent gain to 65.61 on a strong quarterly report for the heavy equipment maker.

Retail giant Sears jumped 11.92 per cent to 38.60 after news of a deal to sell its credit card operations offset a weak earnings report.

Chip giant Intel advanced 5.67 per cent to 24.66 after its earnings report buoyed investors.

Among other companies reporting earnings, Merrill Lynch rose 6.44 per cent to 52.74 but IBM fell 1.37 per cent to 83.72 and Nokia tumbled 20.39 per cent to 14.76. —AFP