Bulls on the bench
Markets take in Greenspan comments, economic signs, retreat from recent rally.
March 7, 2002: 5:12 p.m. ET
By Staff Writer Alexandra Twin
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NEW YORK (CNN/Money) - U.S. stocks pulled back a little Thursday as optimistic comments from Federal Reserve Chairman Alan Greenspan and other economic news couldn't trump a pullback from a recent rally.
The Dow Jones industrial average fell 48.92 points to 10,525.37. The Nasdaq composite lost 8.77 to 1,881.63, while the Standard & Poor's 500 index lost 5.23 to close at 1,157.54.
Markets of late have surged on signs of strength in the manufacturing and services sectors of the economy. Many analysts cited Thursday's pullback as a necessary follow-up to the recent run.
Looking ahead: On Friday, the Labor Department releases its monthly report on joblessness. The nation's unemployment rate is forecast to have risen to 5.8 percent in February following a decline to 5.6 percent in January. Employers are expected to have cut 50,000 jobs from payrolls in February after cutting 89,000 in January.
"There's some concern about the unemployment data tomorrow (Friday), but there's more concern that with so little data coming out next week, markets may drift," Marty Cunningham, head of trading at Schwab Capital Markets, told CNNfn's Street Sweep.
Just after the markets opened Thursday, Greenspan gave a Senate panel a more upbeat assessment of the economy than in the testimony he gave a House panel Feb. 27, saying that a recovery is "well under way." (255KB WAV) (255KB AIFF)
In addition, data released before the markets opened showed fourth-quarter productivity actually rose 5.2 percent, revised up from the originally reported 3.5 percent increase. Economists had forecast a 4.3 percent rise.
Jobless claims fell 5,000 to 376,000 last week, a touch above the 375,000 economists were expecting and a sign that the labor market may be stabilizing.
Although investors initially responded to the data by pushing stocks higher, gains deteriorated fairly quickly.
Some analysts and traders attributed this to a natural pullback after a rally, or to the fact that there wasn't much of an element of surprise surrounding the data. Others pointed to concerns about how Greenspan's comments can be interpreted in terms of the potential to start raising interest rates again and what this would mean for corporations.
"This is consistent with the trend of the Dow all week," said John Hughes, market analyst at Shields & Co. "After rising for two sessions, it pulled back a little Tuesday. Wednesday was good, so we're seeing a little consolidation today (Thursday). We may trade sideways for a little while."
In global trade, European bourses powered higher by the close as did Asian markets. The dollar was sharply lower against the yen and a little lower versus the euro. Some traders said the dollar's sharp decline was another factor in the day's retreat.
Treasury prices fell sharply by the close, pushing the 10-year note yield up to 5.22 percent from 5.05 percent late Wednesday. Light crude oil futures rose 50 cents to $23.71 a barrel in New York. Gold futures were lower in Chicago.
Market breadth was positive. On the New York Stock Exchange, advancers edged decliners as nearly 1.50 billion shares changed hands. On the Nasdaq, winners edged losers 9-to-8 as 1.88 billion shares traded.
Network and chips vs. biotechs
Boeing (BA: down $1.38 to $48.48, Research, Estimates) lost a multibillion-dollar South African aircraft deal to rival Airbus, putting pressure on that stock and the Dow overall. Conglomerate 3M (MMM: down $0.44 to $121.13, Research, Estimates) and computer hardware maker IBM (IBM: down $2.59 to $103.71, Research, Estimates) traded lower as well.
Microsoft (MSFT: down $0.91 to $62.72, Research, Estimates) was lower on uncertainty regarding glitches in its Xbox video game players in Japan.
The Nasdaq was caught in a tight range, with an otherwise modestly higher tech sector pressured by biotechnology stocks.
Sun Microsystems (SUNW: down $0.20 to $8.83, Research, Estimates) and Intel (INTC: up $0.02 to $32.98, Research, Estimates) both were active ahead of their mid-quarter business updates, due out after the close.
Shares of National Semiconductor (NSM: up $1.35 to $32.96, Research, Estimates) rose after the company said it posted a narrower-than-expected loss in its fiscal third quarter than analysts expected, on sales that declined from a year earlier.
But Sepracor (SEPR: down $27.63 to $19.64, Research, Estimates) was sharply lower after it said the Food and Drug Administration intends to issue a non-approvable letter regarding the safety of its allergy drug Soltara. The biotech had been counting on the drug for a significant part of its 2002 revenue.
Sector mate Celgene (CELG: down $4.51 to $23.26, Research, Estimates) also was down after it said its application to market its drug Thalomid for use in cancer patients will be delayed for more clinical testing.
A number of retailers reported strong February sales, including Best Buy (BBY: up $4.42 to $72.99, Research, Estimates), Wal-Mart Stores (WMT: Research, Estimates), and J.C. Penney (JCP: Research, Estimates).
Merrill Lynch upgraded automaker and Dow stock General Motors (GM: up $1.49 to $61.41, Research, Estimates) to "near-term buy" from "neutral." Johnson & Johnson also gave the Dow strength.
Computer hardware maker IBM (IBM: down $2.59 to $103.71, Research, Estimates) has signed a five-year, $500 million deal with Nestle, the world's largest food maker, to provide computers and software.
Dow component SBC Communications (SBC: down $0.28 to $38.75, Research, Estimates) traded lower despite reaffirming an earnings-per-share growth rate of between 5 percent and 7 percent for 2002. The telecommunications company also said earnings per share in its first quarter would either meet or just miss current expectations.
Brokerage house Merrill Lynch (MER: down $1.61 to $52.79, Research, Estimates) said late Wednesday it will sell $2 billion in zero-coupon notes convertible into company stock.
Conseco (CNC: down $0.16 to $3.59, Research, Estimates) was lower after Merrill Lynch cut its rating on the stock to "reduce/sell" from "neutral." The insurer announced late Wednesday that its CFO had resigned, but said Thursday that he had in fact been fired because he was not up to the job. The company replaced him with the president and chief operating officer.
The Federal Trade Commission cleared Hewlett-Packard's (HWP: down $0.18 to $20.00, Research, Estimates) $22 billion merger with rival Compaq Computer (CPQ: up $0.17 to $11.15, Research, Estimates).
The House of Representatives passed a reduced version of the economic stimulus package which proposes to extend unemployment benefits by 13 weeks and give business some tax breaks. The Senate is expected to take it up on Friday. 
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