(Updated from 4:17 p.m. EDT)
An early rally throughout the stock market faded in the afternoon on Thursday, as the
Nasdaq turned lower and the
Dow Jones Industrial Average held on to some of its gains. As it's been throughout the week, trading was relatively quiet. With the
Federal Reserve's Tuesday meeting fast approaching, this week's thumb-sucking activity is changing to nail-biting. Either way, traders' hands aren't free to make trades.
Sure, the recent market strength that's been fueled by less-than-dismal news during the latest earnings season hasn't eroded. But there aren't many new reasons for bullish investors to take the rally any further. So just as it has for much of this week, the market stagnated again today.
S&P 500 Index fell fractionally to 1255. The tech-heavy
Nasdaq Composite Index, which moved higher in the morning, was depressed through the afternoon and finished down 28 to 2128. The
Dow Jones Industrial Average again flirted with 11,000 before pulling back, It finished 43 points higher to 10,910. The Dow and the
, which tracks small-cap stocks, are in positive territory for the year to date.
The Dow and the Nasdaq are knocking against resistance levels now -- technical marks that are hard to exceed unless investors feel they have a clear reason to take stocks higher. Those levels have been identified as
11,000 on the Dow and 2200 on the Nasdaq.
"This is the 'wait and see' week," said Art Hogan, chief market analyst at
. "We tend to get these once a quarter; it's usually a lot of investors reassessing where they stand. Some people are taking a look at how far we've come and how fast, and trying to justify that and justify growth in the fourth quarter."
The lull comes after the Dow tacked on 2,000 points inside of a month. The Nasdaq has bounced 31% since hitting a recent low of 1639 on April 4. Certain stocks that have appeared as 'can't-miss' buys, are now looking a bit more expensive since the second-half outlook for corporate earnings is still in question.
Several times today and in recent trading days, the Dow has approached 11,000, only to then turn lower. "Gains are being capped by resistance and because there is a ton of stuff coming out between now and Tuesday," said Todd Clark, head of listed trading at
. "We've got retail sales, wholesale prices and consumer sentiment tomorrow, and then the
FOMC meeting Tuesday." The
Federal Open Market Committee
of the Fed meets on Tuesday and it is widely expected to cut rates another half-percentage point. Tomorrow, before the opening bell, the latest government data on prices at the wholesale level will be released.
What inspired good cheer on Thursday morning was a steady stream of good news. Storage giant
announced a share buyback and issued an optimistic outlook for spending on information technology in the second half of 2001;
upgraded a slew of large-cap semiconductor capital-equipment makers; and several retailers reported
strong same-store sales for April.
Markets also got a boost after the
European Central Bank
unexpectedly cut interest rates today, dropping its
benchmark lending rate by a quarter point to 4.5%. It was the last of the major central banks to cut rates as a means of stimulating economic growth.
Still, technology's early rally ran out of steam near the end of the session. Chip-equipment maker
, one of six stocks upgraded this morning by Morgan Stanley, ended down 3 cents to $51.01. The
Philadelphia Stock Exchange Semiconductor Index
ended virtually unchanged after gaining 4.6% early in the day.
Other major tech indices finished lower. The
American Stock Exchange Networking Index
dropped 0.7%, the
Nasdaq Telecommunications Index
lost 1.5% and the
Philadelphia Stock Exchange Computer Box Maker Index
The biggest gains today were in the retail and cyclical sectors.
, which both posted better-than-expected same-store sales for April, were among retail's winners. The
S&P Retail Index
ended up 2.8%.
hit new 52-week highs.
The Dow got a lift from a wide range of old economy and retail stocks, particularly Wal-Mart and industrial equipment company
, which also hit a new 52-week high today. It finished up $1.43 to $53.43.
Some market-watchers expect stocks to go nowhere between now and the Fed meeting. Indeed, the recent rally has taken a break as reflected in the fact the Nasdaq has been flat since the beginning of May. The Dow and the
S&P 500 have closed slightly lower each day this week.
fed funds futures contract, a good proxy for how the market thinks the Fed will act, is priced for a 50-basis-point cut in the
fed funds rate, currently 4.5%. The fed funds rate determines the interest rate at which banks lend to each other. The lower the rate, the lower the cost to borrow.
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