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Market Update: Dow Powers Higher; Nasdaq Turns Positive Near Midday

<LI>Consumer confidence at four-year low in January.</LI><LI>P&G fuels Dow on heels of solid earnings outlook.</LI><LI>Nokia falls on cautious earnings, revenue outlook.</LI>

Updated from 10:59 a.m. EST

The major indices elbowed higher at the open this morning but then parted ways, with the

Nasdaq Composite Index lobbing back into the red and the

Dow clinging to some tepid upside. Lately, the Dow was near session highs, and the Nasdaq had sailed back into the green.

It's likely going to be another shifty and quiet day on Wall Street. Many traders are sitting idly by as they wait for the results of the fateful

Federal Reserve meeting. The two-day meeting kicks off today, but the decision about whether and how much the Fed is cutting interest rates won't come until tomorrow afternoon.

Not that there is really much doubt about what that decision will be. The market is overwhelmingly expecting a half-point interest rate cut, with

fed fund futures -- often a good predictor of Fed interest rate action -- pricing in a 97% chance. Only the most bearish of the bears are expecting a quarter-point cut.

News that consumer confidence levels slipped to four-year lows in January may have helped to quash the early bit of upside. While the weak data supports the case for a half-point interest rate cut, it bodes poorly for imminent economic recovery. Weak consumer confidence is currently one of the biggest threats to a snowballing economic slowdown. Consumer spending is the primary motor of the U.S. economy, and a less confident consumer tightly reins in his spending. In fact, a more cautious consumer has already put quite a dent in retailer profits, from clothiers to PC makers. Meanwhile, a wave of job-slashing has escalated in the past week, which is sure to erode consumer confidence further.

Cisco

(CSCO) - Get Cisco Systems, Inc. Report

remained in the spotlight this morning, but it was rising instead of falling. The most actively traded stock on the Nasdaq, it was lately up 2.2% to $38.12.

Cautious words out of CEO John Chambers over the weekend were the focus of much chatter yesterday and helped put early pressure on the Nasdaq. But Chamber's words weren't anything new. Chambers made

similar remarks earlier this month. Yesterday he said

January was far more challenging than the company originally thought, despite an improvement in its long-term outlook.

Over on the

NYSE, the focus was

Nokia

(NOK) - Get Nokia Oyj Sponsored ADR Report

. The world's largest mobile phone maker was the exchange's most actively traded stock, trading down 7.8% to $34.10.

Nokia was falling after it lowered the bar for first quarter, saying it expects sales growth of only 25% to 30% and flat earnings growth year-over-year due to slowing demand. The only mobile phone maker to earn a profit in the fourth quarter, Nokia reported earnings of 0.25 euros per share, up 39% on the year-ago figure and just ahead of analyst expectations. Net sales grew 46% year-over-year.

PC maker

Gateway

(GTW)

was falling after it announced last night that Chairman Ted Waitt is going back to work last night. The stock rose at the open but was lately down 0.5% to $21.55.

Waitt replaces Jeff Weitzen, in whose favor Waitt had abdicated the chief executive post just 13 months ago. At that time, Waitt's move to the less-active position of chairman reinforced the sense on Wall Street that he was more interested in philanthropy than managing a business and invited speculation over when he would completely withdraw from the company. In that context, his decision to take the reins once again may show just how bad things have gotten at Gateway as it, along with its PC-making brethren, has been socked by slowing demand for computers.

Toothpaste leviathan

Procter & Gamble

(PG) - Get Procter & Gamble Company Report

was the Dow's fuel power, adding 23 points to the upside after the company beat earnings estimates and said it remains "comfortable with the high end" of analysts' estimates for earnings per share growth for the year. Bellwether of tech bellwethers

IBM

(IBM) - Get International Business Machines (IBM) Report

was the biggest weight on the index, despite strength in recent trading. It was cutting 5 points from the blue-chip index.

Meanwhile, an impressive year-to-date rally for tech stocks has tapered off in the past week, and some say stocks are set for a selloff whichever way the Fed goes. Those who have been unable to get in on the year-to-date rally are even desperately hoping for that selloff so they can buy at cheaper rates.

In any case, once the Fed decision is out, investors will likely start trying to guess the next interest rate cut, as well as the tenor of first-quarter earnings. Rate cuts take a while to kick in, and no one knows for sure when the ailing economy and earnings will turn around. Company after company has warned that its current and upcoming quarters of business are disappointing earlier projections.

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Sector Watch

PC makers were out of favor this morning after

Merrill Lynch

voiced continuing concerns over pricing pressure in the sector. Analyst Tom Kraemer said he was worried that

Sun Microsystems

(SUNW) - Get Sunworks, Inc. Report

might not introduce a new microprocessor, which could have helped it skirt intense competition from

IBM

(IBM) - Get International Business Machines (IBM) Report

.

The

Philadelphia Stock Exchange Computer Box Maker Sector

index which rose 4.6% yesterday, was lately down 0.1%.

Dell

TheStreet Recommends

(DELL) - Get Dell Technologies Inc Class C Report

was uup 0.4% at $28.63,

Hewlett-Packard

(HWP)

was falling 0.7%,

Sun Microsystems

(SUNW) - Get Sunworks, Inc. Report

off 4.3%, and IBM was lower by 0.4%.

The

Philadelphia Stock Exchange Semiconductor Index

was up 3.2% with pied piper

Intel

(INTC) - Get Intel Corporation (INTC) Report

up 2.7% to $38.06,

Texas Instruments

(TXN) - Get Texas Instruments Incorporated Report

1.6% higher to $44.61, and

Advanced Micro Devices

(AMD) - Get Advanced Micro Devices, Inc. Report

4% higher to $23.92.

Meanwhile, strength in financials yesterday spilled over into only the banks today. The

Philadelphia Stock Exchange/KBW Bank Index

was 0.2% higher, while the

American Stock Exchange Securities Broker/Dealer Index

was up 0.6%.

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Bonds/Economy

Treasury prices are up sharply in the longer-term securities as the latest consumer confidence data came in very weak, justifying the market's expectations of a half-point cut in interest rates this week. Yields, which move conversely to price, are down by 5 to 10 basis points from the short to the long end.

The

Federal Open Market Committee meeting is in session. A decision on ongoing monetary policy should be announced by tomorrow afternoon. The weekly store sales data released this morning showed modest improvement; January appears to have been a positive month for retailers. But the most significant economic news today was the plunge in consumer confidence, which fell to a four-year low. Fed chairman

Alan Greenspan has been watching this gauge closely. Its latest dip has ignited a flurry of buying. The long bond is now up by more than a point.

The benchmark 10-year

Treasury notelately was up 23/32 to 103 31/32, lowering its yield to 5.218%.

In economic news, the

BTM-UBSW Weekly Chain Store Sales Index

(

definition |

chart ), which is gathered from data submitted by 95 retailers across the country, rose by 0.6% in the week ended Jan.27. The index had dropped 0.7% the previous week. The performance was helped by continued discounting of leftover inventory from the holiday season, and the mix of items sold was again primarily from electronics, home improvement items, hardware and toys. The year-to-year average of the index rose to 3.9% from 3.1% as recorded during the week ended Jan. 20.

The

Consumer Confidence Index

(

definition |

chart |

source

) sank to a four-year low in January, coming in at 114.4. This is its lowest reading since Dec. 1996. In addition, the plunge marks its fourth consecutive decrease. The trend bolsters the case for aggressive easing by the Fed.

The

Redbook Retail Average

(

definition |

chart ) found January sales after four weeks to be 2.2% ahead of December and 3.3% ahead of last January. The average's target is being met due to robust sales at department stores, thanks to markdowns of clearance goods. While discount stores' sales slipped during the fourth week, the discounters' performance for the month has been steady.

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