Good news from blue-chips buoys Dow

NEW YORK, Sept. 25 (UPI) -- Stock prices on the New York Stock Exchange and the Nasdaq Stock Market ended higher Wednesday, buoyed by the positive outlook for some blue chips.

The Dow Jones industrial average rose 158.69 points, or 2.07 percent, to 7,841.82, having sunk 189.02 points Tuesday.

The tech-heavy Nasdaq composite index jumped 40.09 points, or 3.39 percent, to 7,971.69, after slipping 2.76 points in the previous session.

The broader New York Stock Exchange composite index gained 9.70 points to 455.08 while the Standard & Poor's 500 index rose 20.36 points to 839.65. The American Stock Exchange composite index gained 8.56 points to 824.16 while the Wilshire 5000 Index rose 185.56 points 7,971.70.

Big Board volume was an estimated 1.66 billion shares, while Nasdaq volume reached 1.69 billion shares.

Positive news from two major companies, General Electric Co. and Ford Motor Co., lifted the markets from the opening bell.

General Electric said it will report at an analysts' meeting on Thursday that its third-quarter results are on track. Analysts on Wall Street expect GE to post a third-quarter net income of 41 cents a share, according to Thomson First Call. Analysts expect GE to report revenue of $33 billion.

Meanwhile, Ford's chief executive officer, William Ford Jr., said the company plans to increase fourth-quarter production, because recent car sales have been stronger than expected.

But shares came off their best levels after the International Monetary Fund said the risk that skidding U.S. stock prices will pinch spending means Federal Reserve policy-makers must be ready to cut interest rates if necessary.

In its latest World Economic Outlook, the IMF scaled back its previous estimates for U.S. economic growth in 2002 and 2003 and said prospects depended heavily upon whether demand holds up.

"In view of the heightened uncertainties surrounding the outlook, the Federal Reserve has room to wait to withdraw stimulus until the recovery is more clearly established, and if the incoming data were to weaken further, additional interest rate cuts would need to be considered," the IMF said.

The Fed's policy-setting Federal Open Market Committee met on Tuesday and, by a split vote of 10-2, decided to keep its key Fed funds rate at a four-decade low of 1.75 percent.

The IMF predicted the U.S. economy would expand by a relatively tepid 2.2 percent this year and 2.6 percent in 2003 -- down from its estimates of 2.3 percent and 3.4 percent made in April.

This subdued prognosis for U.S. performance fits with the IMF's broader assessment that global growth wasn't recovering as much as anticipated and that conditions were more likely to worsen than improve.

For the United States, the IMF stressed the potential adverse impact from large, continuing losses in stock prices that have carried leading indices, like the Dow Jones Industrial Average, to four-year lows and cut trillions of dollars from investors' wealth.

On the economic front, the National Association of Realtors said sales of existing single-family homes in August fell 1.7 percent to a seasonally adjusted annual rate of 5.28 million units from an upwardly revised level of 5.37 million units in July.

Economists on Wall Street were expecting sales to rise 1.3 percent during the month.

David Lereah, NAR's chief economist, said: "Even with a decline in August, we've had tremendous sales this year and the level of existing-home sales activity remains historically strong."

U.S. Treasury prices headed lower. The 10-year bond fell 29/32 to 105 3/32. Its yield, which moves in the opposite direction of its price, rose to 3.75 percent from 3.64 percent late Tuesday.

In Europe, stock prices in London, Frankfurt and Paris all rose. The London International Stock Exchange's blue-chip FTSE-100 index rose 25.10 points, or 0.68 percent, to 3,696.20. The German DAX index rose 2,962.50, or 3.11 percent, to 2,962.50, while the French CAC-40 index rose 42.57 points, or 1.55 percent, to 2,785.38.

The IMF's semi-annual reading of global economic health noted tepid consumption and investment in the 12-country eurozone and accordingly slashed growth forecasts for this year and next. The IMF expects GDP growth of just 0.9 percent in 2002, vs. an April estimate of 1.4 percent.

Next year, the bloc's economy should rise 2.3 percent, vs. the 2.9 percent seen six months ago. But even that will require luck.

"Questions remain about the resilience and dynamism of the expected recovery," the IMF noted.

The region is dangerously dependent on exports and the euro, which has already risen quite sharply against the U.S. dollar, could continue to appreciate and curb foreign sales. And equity markets have fallen further than even in the United States. Stock holdings may be less important for the real economy than in the United States, but the declines could still sap confidence.

Then there is the awkward truth about industrial powerhouse Germany, the region's largest economy, which is barely growing. It remains in a delicate position and could hurt its neighbors if it fails to kick into higher gear, the IMF said.

"Prospects for industrial production and domestic demand in Germany appear particularly uncertain, and further weakness there would have important implications for Europe as a whole," the fund warned.

Against this background, the IMF recommended that, since the region's fiscal policy was inhibited by strict budget rules and since inflation was not seen as a risk, the European Central Bank should come to the rescue.

The ECB, whose independence is enshrined in EU law, sets common interest rates with the explicit objective of preserving stable prices. These it defines as between 0 percent and 2 percent.

It has held rates steady at 3.25 percent since November but has raised hopes of a cut by acknowledging that the recovery had faltered, which it blamed on collapsing stock markets and the higher price of oil.

Earlier in Asia, prices on the Tokyo Stock Exchange slid after another fall Tuesday on Wall Street. Prices were also affected by caution over upcoming government steps to fight deflation and reform the ailing financial sector.

Japan's blue-chip Nikkei Stock Average, which fell 159.44 points Tuesday, lost another 156.23 points, or 1.7 percent, to 9,165.41 for the third straight session of declines.

The Nikkei at one point was as low as 9,106.45, just above the 19-year closing low of 9,075.09 set earlier this month.

Analysts said that short covering in some technology issues and major banks and hopes for public fund support before the Sept. 30 end of the first half briefly trimmed initial sharp losses.

Experts said investors will closely monitor the Group of Seven finance ministers and central bankers meeting Friday, looking for clues of upcoming government policy steps.

The market also anticipates a cabinet reshuffle in Japan as early as next week.

After Prime Minister Junichiro Koizumi pledged to accelerate the write-off of bad loans at the nation's struggling banks, and the Bank of Japan announced its plan to absorb some of banks' shareholdings, investors are hoping the Financial Services Agency will come up with drastic steps to reform the financial sector.

As cabinet members are divided on the need for another round of public fund injections into banks, investors are anxious to see whether bank minister Hakuo Yanagisawa will be replaced, traders said. Yanagisawa is strongly against a public fund injection.

Analysts attributed the Nikkei's late session fall to remarks by Bank of Japan Governor Masaru Hayami, who said the amount of shares the central bank will buy from private banks "won't be that big."

Elsewhere in Asia, prices on the Hong Kong Stock Exchange ended lower in busy options-related trading ahead of the expiration of the September Hang Seng Index futures. The blue-chip Hang Seng Index, which lost 117.19 points Tuesday, slipped another 72.77 points, or 0.8 percent, to 9,124.91.

Prices fell to their lowest levels since last November on the Taiwan Stock Exchange. The Weighted Index, which lost 41.46 points Tuesday, lost another 100.99 points, or 2.4 percent, to 4,185.95 in a technology share sell-off.

Prices also ended lower in South Korea. The Korea Composite Stock Price Index, which fell 7.15 points Tuesday, lost 14.32 points, or 2.1 percent, to close at 657.96 -- its lowest close since Dec. 26.

Elsewhere around the Pacific region, prices ended lower on the Australian Stock Exchange, undermined by worries over the U.S. economy and fears of a U.S.-led attack on Iraq. The blue-chip All Ordinaries Index, which fell 12.90 points Tuesday, lost another 41.50 points, or 1.4 percent, to 2,946.60.