Nasdaq closes at its lowest level in more than two years

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Thursday February 22, 6:16 pm Eastern Time

Dow Ends Unchanged; Nasdaq Drops 24

Dow Ends Virtually Unchanged at 10,527, While Nasdaq Falls 24 to 2,245, Its Lowest Close Since January 1999

By LISA SINGHANIA
AP Business Writer

NEW YORK (AP) -- An industry report suggesting the economy is improving failed to cheer Wall Street on Thursday as the Nasdaq composite index fell to its lowest level in more than two years.

Analysts said the market was concerned the upbeat news was temporary and would deter the Federal Reserve Board from cutting interest rates again. They also noted that buyers are sitting out a market in which stronger company profits and stock prices are elusive.

The Nasdaq composite index closed down 23.98 at 2,244.96, its lowest close since hitting 2,208.05 on Jan. 4, 1999.

Blue chips were less vulnerable. The Dow Jones industrial average ended the session virtually unchanged, rising 0.23 to 10,526.81 despite sliding as much as 153 points in heavy trading.

The broader Standard & Poor's 500 index slipped 2.45 to 1,252.82.

All three indexes are below where they started 2001, despite healthy runups in some stocks last month. The Nasdaq has been particularly devastated: it is now nearly 56 percent off its all-time closing high of 5,048.62, reached last March.

``I believe investor fear is beginning to develop,'' said Bill Barker, an investment strategy consultant at Dain Rauscher. ``We're beginning to see people say: I want out of this market because it's going to go a lot lower.''

Pessimism again ruled the street Thursday, pushing down a brief advance early in the afternoon on bargain hunting.

Among the biggest losers: Brocade Communications, which tumbled $2.75, or 6 percent, to $41.94, after some investment firms reduced their earnings expectations on worries about the future.

The negative sentiment was also felt by blue chips, although to a lesser degree.

Industrial and retailing sectors struggled, led lower by General Motors, down 34 cents at $52.12, and Wal-Mart, off 51 cents at $49.70. Even pharmaceuticals, which are popular with investors in times of economic uncertainty, suffered: Merck declined $1.01 to $77.70.

The bargain hunting did drive a few stock prices higher, though, particularly of companies that had been beaten down in the previous session.

The Dow got lifts from banker J.P. Morgan Chase, up 95 cents at $48.30, and IBM, which gained $1.39 to $108.40. Cisco Systems, which has been battered in recent months, also got a respite from investor wrath, rising $1.31 to $26.44, a 5 percent gain.

But overall, the market remained weak -- a reflection, analysts said, of worries that the economy is slowing too much and it may take more than a few months before it turns around.

The Fed has lowered interest rates twice this year and many market observers were counting on a third cut next month. Thursday's economic report raised concerns that might not happen since such cuts are usually predicated on the assumption growth is slowing, not increasing as the news suggested.

The New York-based Conference Board said its Index of Leading Economic Indicators rose a greater-than-expected 0.8 percent to 109.4 last month, reversing three consecutive monthly declines.

``The index results suggest that the Fed might be advised to put any easing on hold,'' said Hugh Johnson, chief investment officer at First Albany Corp., who also said investors don't share the index's optimistic forecast. ``The market is just worrying deeply that the Fed will not give us what we need.''

The index, which attempts to measure the direction the economy is headed in, is based on the performance of indicators ranging from weekly manufacturing hours and interest rates to initial claims for unemployment insurance.

Trading was heavy and volatile. Declining issues outnumbered advancers nearly 2 to 1 Thursday on the New York Stock Exchange. Consolidated volume came to nearly 1.60 billion, ahead of the 1.43 billion reported Wednesday.

The Russell 2000 index fell 6.25 to 477.26.

Overseas, stocks were mixed. Japan's Nikkei stock average slipped 0.2 percent and Germany's DAX index lost 1.1 percent. Britain's FT-SE 100 rose 0.5, and France's CAC-40 dropped 0.4 percent.

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On the Net:

New York Stock Exchange: http://www.nyse.com

Nasdaq Stock Market: http://www.nasdaq.com

-- (M@rket.trends), February 23, 2001


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