Stocks Mixed as Rally Fizzles

Wall Street’s latest attempt at a rally fizzled Monday, as investors decided they were better off collecting their small wins rather than risking further pullbacks.

Blue chips closed slightly higher, while technology shares stalled.

The market was somewhat unnerved by word that an American citizen had been arrested for plotting to explode a radiological “dirty” bomb. The news, which came early in the trading day, prompted a sharp but brief sell-off. Although the market recovered, terrorism concerns limited the market’s upside.

“All of these things have investors on the edge because they lower the premium that investors are willing to pay for long-term assets,” said Ronald J. Hill, investment strategist at Brown Bros. Harriman & Co.

The Dow Jones industrial average closed up 55.73 points, or 0.6%, at 9,645.40, despite rising as much as 128 earlier in the session. Last week, the average fell 335 points.

Broader stock indicators fluctuated. The Standard & Poor’s 500 index rose 3.21 points, or 0.3%, to 1,030.74, while the Nasdaq composite index fell 4.79 points, or 0.3%, to 1,530.69. It was Nasdaq’s third-consecutive losing session.

Rising and falling stocks were about even on the New York Stock Exchange, while losers led by about 6 to 5 on Nasdaq. Trading volume was moderate.

Retail was one of the few bright spots. Wal-Mart Stores advanced $1.97 to $56.40 on word its June sales at stores open at least a year should be at the high end of forecasts, while Kohl’s rose $1.17 to $75. The Amex index of retailing stocks rose 1.8%.

Stocks have been falling for several weeks, but investors have not rushed in to take advantage of the declines. Analysts say a mix of lackluster earnings prospects, fears of more terror attacks and ongoing accounting scandals have made stocks appear more risky--and therefore less attractive--to many investors.

Although the latest arrest of a suspected terrorist suggested the government’s anti-terrorism measures might be working, the news was still a reminder of how many potential wild cards the market faces.

Even an upbeat report by Goldman Sachs chief investment strategist Abby Joseph Cohen that the Dow and S&P; should be trading 20% higher than their current levels failed to inspire buying. Cohen said the Dow should be at 11,300 and the S&P; 500 should be at 1,300.

“It’s more of the same. There are a lot of investigations going on right now. And it’s hard to have a lot of confidence,” said Robert Harrington, head of listed block trading at UBS Warburg. “The mood is cautious because every time you take on more risk, you get hurt.”

The dollar rose against the yen and gold prices fell $5.90 to $318.70 an ounce due to the strengthening dollar and the easing of tensions between India and Pakistan. Oil prices fell to their lowest level in eight weeks, sliding 46 cents to $24.29, on expectations Russia and Norway will boost exports.

Treasury yields fell as investors initially sought the safety of government securities. The yield on the benchmark 10-year Treasury fell to 5.03% from 5.07% Friday.

In other market news:

* Falling oil prices were a drag on energy stocks. ChevronTexaco fell 90 cents to $86.35 and oil field services giant Schlumberger lost $1.10 to $48.25. Offshore service company Tidewater slid $1.64 to $36.42.

* Williams closed down 11 cents at $8.59 after the company lowered its 2002 forecast, but announced efforts to reduce exposure to its energy risk management operations. Duke Energy dropped 91 cents to $29.09 after Merrill Lynch downgraded the stock, citing pressure created by a government investigation into whether energy traders manipulated prices in California.

* Investors snapped up drug stocks, expecting those shares have fallen enough to reflect lower earnings forecasts, traders said. Pfizer rose 85 cents to $35.35, and Merck added $1.62 to $54.30.

In technology, Nokia dropped 30 cents to $12; its mid-quarter update is expected today. Many analysts are expecting the telecommunications company to lower its forecast. Intel fell 93 cents to $21.07, adding to its 18.5% loss Friday after warning that second-quarter sales and profit would be lower than expected.

*

Market Roundup, C8-9