NEW YORK, Jan. 2 (UPI) -- Stock prices on the New York Stock Exchange and the Nasdaq Stock Market were lower in moderate trading at midday Wednesday as investors digested mixed signals on the health of the economy.
The blue-chip Dow Jones industrial average, which sank 115.49 points Monday, was down another 55.60 points to 9,965.90. The tech-heavy Nasdaq composite index, which fell 38.86 points in the previous session, was down 8.11 points to 1,942.29.
The Dow industrials fell 7.1 percent last year after a 6 percent slide in 2000. The Nasdaq lost 21 percent following a tumble of more than 39 percent in 2000.
The broader New York Stock Exchange composite index was down 5.07 to 584.73 while the Standard & Poor's 500 index was down 7.51 to 1,140.57.
The American Stock Exchange composite index was down 7.97 points to 839.64 while the Russell 2000 Index was down 6.83 to 481.67.
Big Board volume rose to an estimated 454.60 million shares from 260.50 million shares changing hands during the same period Monday.
Analysts said stocks opened higher lifted by a report from SIA showing worldwide sales of semiconductors rising 1.6 percent in November to $10.60 billion from $10.44 billion in October making this the second month in a row with sequential growth.
But, stocks turned lower as investors faced a barrage of mixed signals about the health of the economy.
The Institute for Supply Management, formerly known as the National Association of Purchasing Management, said the U.S. manufacturing sector shrank modestly in December, although a markedly slower pace of decline raised hopes of a quick economic recovery.
The group's manufacturing index rose to 48.2 in December, after rising to 44.5 in November, from 39.8 in October.
December's drop was the 17th consecutive decline in the overall index. Economists had expected the index to move to 46.0, but gains in orders for new goods helped raise it even higher.
Index readings above 50 indicate expansion of activity and prices in the non-manufacturing sector, while readings under 50 denote contraction.
"While the manufacturing sector continues to decline, the rate of decline has slowed very quickly, giving some hope that recovery may come faster than is generally found in a major downturn. In December, both new orders and production returned to a growth scenario and the trend for most of the indexes is definitely in the right direction," said Norbert J. Ore, who assembles the survey for the ISM.
The December ISM business activity index suggests a small amount of growth in the overall economy, the report said.
At 48.2, the index was above the 42.7 that is considered the threshold between expansion and contraction in the wider economy. The index corresponds to a 2.0 percent annualized increase in gross domestic product.
New orders in December stood at 54.9, reversing two months' of declines, after moving to 48.8 the prior month. The production index rose to 50.6 over November's 47.1.
On Friday, the Purchasing Management Association of Chicago said its index of area business activity rose to 41.4 in December on a seasonally adjusted basis from 41.1 in November. That report and others over recent days have raised expectations among economists that the economy's sharp slide may now be over, although few see any return to healthy growth until midyear.
Meanwhile, retailers enjoyed solid holiday-related sales and traffic at the end of the fourth week of December, according to the Bank of Tokyo-Mitsubishi-UBS Warburg Retail Chain Store Sales Index.
The index showed sales rose 0.9 percent in the week ended Dec. 29 from the week before, on a seasonally adjusted, comparable-store basis.
Store sales were on-to-above plan for most retailers, BTM/UBS Warburg said.
Consumer demand remained strongest in the West and Northeast, the report said. Toys, electronics, video games and systems, sporting goods and men's apparel enjoyed solid demand, BTM and UBS said.
But, retail sales fell in the fourth week of December, although most retailers were able to meet or exceed their plans for the critical Christmas spending week, according to Redbook.
In its latest report on the national retail scene Redbook said sales fell 3.9 percent during the fourth week of the December versus the prior month. Still, the reading was above the December target of a 4.7 percent drop.
The report also showed sales during the week ended Dec. 29 rose 1.5 percent versus the same week a year ago, while December sales versus the same month a year ago fell 0.3 percent.
And, the New Year also began with downbeat forecasts from brokerages.
Merrill Lynch & Co.'s U.S. strategist Richard Bernstein said he sees the Standard & Poor's 500 index rising just 5.0 percent in 2002.
Bernstein, who was appointed chief U.S. strategist at the No. 1 full-service brokerage in December, set a year-end target of 1,200. No reason for the target was given in the note to clients.
Bernstein left the firm's asset recommendation mix in its model portfolio at 60 percent stocks, 20 percent bonds, and 20 percent cash.
"We think this normal weighting of equities adequately reflects the potential positives of monetary and fiscal stimuli versus the potential negatives associated with a speculative environment," Bernstein told clients.
The Standard & Poor's 500 Index lost 13 percent for all of 2001.
Meanwhile, U.S. Treasury prices headed lower after the surprisingly strong data on U.S. manufacturing dimmed hopes the Federal Reserve would have to cut interest rates much more to stimulate the U.S. economy.
The 10-year bond fell 16/32 to 99 9/32. Its yield, which moves in the opposite direction of its price, rose to 5.09 percent from 5.03 percent late Monday.
In Europe, stock prices ended lower in light trading in London, Frankfurt and Paris, pressured by the opening losses on Wall Street. The London International Stock Exchange's blue-chip FTSE-100 index eased 3.5 points to 5,213.9. The German DAX index lost 24.63 points to 5,135.47 and the French CAC-40 index lost 44.14 points to 4,580.44.
Analysts said stocks were also pressured by weakness in oil and gas stocks as well as selective selling in some bank issues.
Earlier in Asia, prices on the Hong Kong Stock Exchange ended slightly lower in razor thin trading as investors awaited more signals and the return of fund managers from holidays. Hong Kong's blue-chip Hang Seng Index slipped 46.36 points, or 0.41 percent, to 11,350.85 as trading activity declined to its lowest level since Feb. 22, 1999.
Meanwhile in Seoul, bullishness on the South Korean economy and especially on the semiconductor sector pulled South Korea's main stock index to its highest level in 16 months. The Korea Composite Stock Price Index, or Kospi, surged 31.25 points, or 4.50 percent, to 724.95 -- its highest level since ending at 731.56 on Aug. 29, 2000.
Chip stocks led the market higher, as rising DRAM -- dynamic random access memory -- prices brightened expectations the sector will be lifted out of its 2001 slump.
Elsewhere in Asia, prices on the Taiwan Stock Exchange ended higher as a recent buying spree continued into the New Year on expectations of economic recovery in 2002. The Weighted Price Index of the Taiwan Stock Exchange rose 48.81 points, or 0.87 percent, to 5,600.05.
The market slipped into negative territory in early dealings as some investors took profits on gains posted prior to the New Year holiday. However, it soon recovered and made headway during the last hour of trading.
Elsewhere in the Pacific region, stocks ended higher on the Australian Stock Exchange as investors brushed aside the New Year's Eve declines on Wall Street. The blue-chip All Ordinaries Index rose 24.60 points, or 0.73 percent, to 3,384.50.
Analysts noted most of the increase came late in the session as the market played catch up with a rise in the futures market.
Meanwhile, markets in Japan remained closed for the holidays and will remain closed through Friday, when stocks will trade for half a day. They will close again next Monday.
