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Stocks notch modest gains

/ Source: The Associated Press

Wall Street staggered through an indecisive session Wednesday, ending modestly higher as investors’ interest rate worries robbed them of any incentive to make sizeable commitments to stocks. The market again shrugged off upbeat earnings reports, although tech stocks posted the largest gains in response to Motorola Inc.’s strong earnings report.

For the second day in a row, Federal Reserve Chairman Alan Greenspan told a congressional committee that the economic recovery is deepening and that interest rates will have to rise at some point, though he didn’t say when.

“As I have noted previously, the federal funds rate must rise at some point to prevent pressures on price inflation from eventually emerging,” Greenspan told the Joint Economic Committee on Wednesday.

Similar testimony by Greenspan to the Senate Banking Committee on Tuesday led to a sharp sell-off in stocks.

The major indexes moved in and out of positive territory as investors also vacillated. The Dow Jones industrial average ended up 2.77, or 0.03 percent, at 10,317.27 after falling more than 120 points Tuesday.

The broader gauges were helped by Motorola. The Nasdaq composite index rose 17.00, or 0.9 percent, to 1,995.63. The Standard & Poor’s 500 index gained 5.94, or 0.5 percent, at 1,124.09.

The mood on Wall Street has become so foul that investors who for months sought a strengthening economy and higher earnings are now selling despite many signs of economic and corporate health. Since the government issued a higher-than-expected consumer price report a week ago, the stock market has been fixated on the prospect of higher interest rates — and become even more uneasy this week as Greenspan confirmed investors’ fears.

Most economists don’t expect the Fed to raise rates at its next meeting on May 4, but many believe rates will move higher by the end of the summer.

Richard E. Cripps, chief market strategist for Legg Mason in Baltimore, said he believed investors were overreacting to the expected rate increases.

“The reason interest rates are going up is for the right reason — the economy is stronger, and we’re starting to see it broadly domestically and synchronous globally. And that’s positive,” Cripps said.

Still, Robert Christian, chief investment officer at Wilmington Trust Co., said he believed some investors hadn’t faced up to the reality of interest rate hikes before Greenspan’s latest testimony.

Talk of inflation and interest rate increases by Greenspan is “just going to hit you smack in the face and makes you sit up and take notice,” Christian said.

J.P. Morgan Chase & Co., which beat analysts’ first-quarter estimates by 5 cents a share, was nonetheless a victim of interest rate concerns, falling 86 cents to $37.68.

The bright spot for the market was Motorola, which jumped $2.98 to $19.20 after surprising Wall Street and shareholders late Tuesday with its strongest quarter in years due to surging sales of new cell phones and other products. First-quarter profits more than tripled to $609 million and revenue came to $8.6 billion, nearly $2 billion higher than the forecast.

Other tech stocks rose in reaction to Motorola, but also in a rebound following a nearly 42-point drop in the Nasdaq on Tuesday.

Intel Corp. picked up 21 cents, closing at $26.28, while Cisco Systems Inc. rose 26 cents to $22.37.

Eastman Kodak Co. rose 73 cents to $25.77. Before the market opened, Kodak said first-quarter profit more than doubled, narrowly beating forecasts.

Ford Motor Co. also reported before the bell, blowing away analysts’ estimates with a $1.95 billion profit. Its shares were up $1.39 at $14.95.

The Russell 2000 index, which tracks smaller company stocks, was up 7.41, or 1.3 percent, at 583.22.

Advancing and declining issues were about even on the New York Stock Exchange. Volume was moderate.

Overseas, Japan’s Nikkei stock average finished 0.07 percent lower. France’s CAC-40 lost 0.8 percent, Britain’s FTSE 100 fell 0.64 percent and Germany’s DAX index lost 0.86 percent.