NEW YORK, (Reuters):
STOCKS EKED out modest gains after a choppy session on yesterday as downbeat news about corporate heavyweight Citigroup Inc. put pressure on blue chips, hampering earlier gains following Iraqi acceptance of a U.N. resolution to disarm.
In the morning, the market soared on U.S. Federal Reserve Chairman Alan Greenspan's hopeful words about the economy in testimony before Congress and on news of Iraq's decision.
By the afternoon, however, traders said Iraq's move to accept U.N. arms inspectors had not quieted all investors' concerns that the country would comply.
"The market is not so sure, given what we know about Iraq and their leadership back 10 or 12 years ago," said Jack Francis, senior Nasdaq trader at UBS Warburg. "I don't think the market is going to react to any comments until the eleventh hour."
The Dow Jones industrial average rose 12.49 points, or 0.15 percent, to 8,398.49, after earlier rising 107 points to the day's high of 8,493.51. The broader Standard & Poor's 500 Index ended down 0.42 of a point, or 0.05 percent, at 882.53, based on the latest data. The technology-laced Nasdaq Composite Index was up 11.77 points, or 0.87 percent, at 1,361.33.
Dow component Citigroup slumped $1.39, or 3.8 percent, to $35 and was the most active stock on the Big Board as the bank was again embroiled in questions over whether it influenced stock market research.
A Wall Street Journal report on Wednesday said a series of e-mails written in 1999 by analyst Jack Grubman indicated that Sanford Weill, Citigroup's CEO, had pushed him to review his AT&T stock rating to gain the support of AT&T CEO C. Michael Armstrong and help discredit Citigroup's former co-CEO John Reed.
"It doesn't help investors' confidence and it's a huge company that weighs on all the major averages," said David Memmott, head of listed block trading at Morgan Stanley.
"If you took Citi out of the equation, today would look pretty different," Memmott said.
Sears, the nation's No. 4 retailer, also dragged on the broader market, falling US$1.70, or 7.5 percent to US$21 after an analyst downgrade rekindled concern that the company may suffer a prolonged slump in profit and sales growth. Sears, which hit a 20-year low of US$19.75 early in the session, was the fourth-most active stock on the NYSE in afternoon trade.
Drug giants Schering-Plough Corp. and Merck & Co. Inc. weighed on pharmaceutical stocks as Schering-Plough tumbled 4 percent to $20.66. The company said it received two new grand jury subpoenas from federal investigators in Massachusetts related to its clinical trial, sales and marketing practices.
Shares of Merck, the world's No. 3 drugmaker, ended down $2.02 or 3.7 percent at $52.80 after disclosing late in the session the U.S. Department of Justice is probing its marketing practices as part of a larger investigation into pharmaceutical companies.
The Standard & Poor's oil and gas index slipped 2 percent and was the worst-performing industry group in the S&P 500. The stocks tumbled in tandem with crude oil futures, which hit a 5-month low of below $25 a barrel following Iraq's acceptance of the U.N. resolution.
The United Nations Security Council said Iraq would face "serious consequences" if it did not abide by the resolution's terms. The Iraqi U.N. ambassador, Mohammed Aldouri, said his country accepted the resolution to avoid a U.S.-led attack.
Crude prices had been rising in recent months on the possibility of war in Iraq, which could curb exports from the oil-rich Gulf region.
Stocks were also helped along by Greenspan's comments during a question-and-answer period that the economy does not appear to have the usual weaknesses that presage slumps.
Traders, however, said the reverberations of Greenspan's remarks in the market were short-lived.
"Greenspan spoke but was kind of anti-climactic," said Morgan Stanley's Memmott. "There was not a whole lot he could say except basically that he's got his eye on the economy."
