Nasdaq down ahead of US jobs data

NEW YORK: Blue-chip stocks rose on Wednesday as downbeat US

economic data eased fears about higher interest rates, but bonds fell after the

Treasury quashed expectations for an end to future sales of the 30-year bond.

The dollar rose to fresh two-month highs against major European currencies

amid expectations that solid growth and tame inflation will keep money flowing

into US assets. By the close of trading, the dollar retraced most of its run

higher, and edged up just slightly against the euro. In New York, crude oil

futures settled higher after statistics showed a big drop in US crude stockpiles

in the latest week.

The Nasdaq market took a nosedive late in the session, while broader market

measures showed marginal gains, as the high-tech sector groped for direction

ahead of key US jobs data due later this week.

"It is a song-and-dance routine until we get to Friday's payroll

data," said  Donaldson, Lufkin

& Jenrette chief investment officer Thomas Galvin.

A lack of fresh earnings news, a bulging supply of initial public offerings

and lingering anxiety over the Fed's next move combined to paralyze the Nasdaq

market, Galvin added.

Wall Street breathed a sigh of relief when a government report showed that

sales of US homes dropped to their lowest level in 2-1/2 years, hinting that

more than a year of Federal Reserve interest rate hikes may be taking effect.

"The economic reports are pretty encouraging for the soft landing

scenario," said Edward Jones chief market strategist Alan Skrainka.

Wall Street has long speculated about whether the Fed can achieve a

"soft landing" for the economy, raising rates enough to slow growth

and stave off inflation, but not so much that it stifles corporate earnings

growth.

The Dow Jones industrial average added to the prior session's gains climbing

80.58 points, or 0.76 per cent, to 10,687.53, according to the latest data. That

left the blue-chip gauge off 7.04 per cent for the year.

The Nasdaq composite index, however, shed its early gains and dropped 27.06

points, or 0.73 per cent, to 3,658.46. Year to date, the Nasdaq was down 10.1

per cent.

The Standard & Poor's 500 index inched up just 0.60 of a point, or 0.04

per cent, to 1,438.70.

Technology stocks have been whipsawed in recent weeks as any nearly run-up

has been seen as an opportunity to lock in profits before a more uncertain

second half of the year.

Nevertheless, selected technology names were key to the Dow's move higher,

with computer maker International Business Machines Corp. up 4-1/8 at 114-11/16

and rival Hewlett-Packard Co. up 4-5/8 at 112-1/2.

Also underpinning the Dow was oil giant Exxon Mobil Corp., which sailed

2-15/16 higher to 82-7/8 a day after it boosted by some 65 per cent the amount

of savings it expects from the blockbuster merger that created it.

The Nasdaq's most active stock was Dell Computer Corp., which fell 2 to

39-9/16 after a US Bancorp Piper Jaffray analyst lowered his investment rating

on the No. 1 seller of personal computers to the US market. The analyst, Ashok

Kumar, said he believes the company's current prediction of 30 per cent revenue

growth is unsustainable.

Market analysts said trading would likely remain choppy as investors kept

their eyes trained on the flow of economic reports and pondered the Fed's next

move on monetary policy.

The market went into a tailspin last Friday after second-quarter gross

domestic product came in at a surprisingly strong 5.2 per cent.

The central bank's rate-setting committee meets next on August 22 to decide

whether to ratchet up rates again to keep inflation out of the economy.

On Wednesday, the US Commerce Department reported that sales of new

single-family homes in June fell to a seasonally adjusted annualized rate of

829,000 units, the lowest since December 1997. Analysts had been expecting a

stronger 881,000 units rate.

Adding to the cheer, the Index of Leading Economic Indicators, a key

forecasting gauge for the US economy, was flat in June, portending a slowdown in

the vigorous expansion, the Conference Board said.

The 30-year Treasury bond fell 19/32, or $5.9375 on each $1,000 of face

value. The yield rose to 5.77 per cent from 5.73 per cent at Tuesday's close.

The 10-year note advanced 3/32 to yield 5.98 per cent, versus 5.99 per cent on

Tuesday.

The euro settled at 91.37 cents, barely changed from 91.39 cents late

Tuesday. The dollar fell to 108.87 Japanese yen from 109.24 yen.

On the New York Mercantile Exchange, crude oil for September delivery rose 47

cents to close at $28.26 a barrel. The catalyst for the gains was a report from

an industry group, the American Petroleum Institute, showing a startling drop in

US crude oil inventories for the latest week.

Overseas, London's FTSE 100 index was 11.7 points or 0.18 per cent higher,

closing at 6,391.0. In Tokyo, the Nikkei average rose 106.52 points, or 0.66 per

cent, to close at 16,206.19.

(C) Reuters Limited 2000.