NEW YORK, July 1 (UPI) -- Stock prices were mixed in choppy trading at midday Monday, with blue-chips supported by a favorable earnings outlook from 3M Co.
The blue-chip Dow Jones industrial average, which lost 26.66 points Friday, was ahead 3.50 points to 9,246.70. The tech-heavy Nasdaq composite index, which added 4.01 points in the previous session, was down 27.27 points to 1,435.94.
The broader New York Stock Exchange composite index was down 2.06 to 531.01 while the Standard & Poor's 500 index was down 5.01 to 984.81.
The American Stock Exchange composite index was ahead 5.36 points to 898.35 while the Wilshire 5000 Index was down 71.17 to 9,312.83.
Big Board volume declined to an estimated 494.10 million shares from 582.20 million shares changing hands during the same period Friday.
Analysts said the Dow Jones Industrial Average was lifted following a better-than-expected second-quarter profit target from 3M Co.
3M, known for its Scotch Tape and Post-It brands, said it expects second quarter earnings of at least $1.33 a share, before non-recurring items. That estimate is above its previous view of $1.22 a share and higher than Wall Street expectations of $1.25.
Elsewhere on the corporate front, Northrop Grumman announced plans to acquire TRW Inc. for $7.8 billion, or $60 a share, ending a four-month standoff between the companies and positioning Northrop to be the nation's second largest defense contractor.
The Nasdaq, however, was taking a hit as troubled WorldCom Inc. shares resumed trading after being halted last Tuesday due to its $3.8 billion accounting debacle.
WorldCom plunged 75 cents, or 90.4 percent, to 8 cents on four-times its average daily volume as investors took their losses and ran from the company.
Al Goldman, chief market strategist at A.G. Edwards said, "This week the market will stay focused on possible new corporate confessions and fears of a fourth of July terrorist attack.
"How the market handles all this will be critical to the short term," Goldman added.
Meanwhile, the third quarter is starting off on a bearish note as Merrill Lynch & Co.'s chief quantitative strategist Richard Bernstein lowered his 12-month target for the Standard & Poor's 500 Index to 1,050 from 1,200.
In a research note Bernstein said the firm's indicators expect a 5 percent to 6 percent return for the S&P 500, a far cry from the 20 percent expected return its former target of 1,200 implied.
He said that despite the recent market decline, there continues to be a high probability that bonds will outperform stocks and the price-to-earnings ratio as compared to the growth rate for the S&P 500 remains extraordinarily high.
He said Merrill's earnings growth forecast remains below consensus for 2002 at about 13 percent.
Bernstein added that the latest reading of its sell-side indicator -- a market-timing barometer based on a survey of Wall Street strategists' recommended asset allocations -- came in well into "sell territory" at 67.1 percent.
Any reading at or above 61.2 percent generates a sell signal.
The results indicate that market watchers are increasingly aware of the many problems facing the market but still do not believe that the market will bottom. Given the psychology of investors currently, the much-anticipated capitulation remains out of sight, he said.
Bernstein, however, made no changes to the firm's asset allocation which still calls for 50 percent in stocks, 30 percent in bonds and 20 percent in cash.
On the economic front, the Institute for Supply Management said economic activity in the manufacturing sector expanded for a fifth consecutive month during June while the overall economy grew for the eighth consecutive month. The group's much watched manufacturing index rose 0.5 percentage point to 56.2 from 55.7 percent in May.
Economists on Wall Street were expecting the index to ease to 55.5 percent during the month.
The index is closely watched by Wall Street because a reading below the key 50 level indicates the sector comprising one-fifth of the economy is shrinking.
A reading above 50 percent indicates that the manufacturing economy is generally expanding.
And, the Commerce Department said U.S. construction spending fell in May, as spending on residential construction retreated from April's all-time high.
Total construction spending fell 0.7 percent in May to a seasonally-adjusted annual rate of $852.0 billion, after rising 0.4 percent in April. Most economists on Wall Street were expecting construction spending to rise 0.3 percent during the month.
Meanwhile, U.S. Treasury prices lost ground. The 10-year bond fell 12/32 to 100 7/32. Its yield, which moves in the opposite direction of its price, rose to 4.84 percent from 4.80 percent late Friday.
In Europe, stock prices ended slightly lower in London, Frankfurt and Paris. The London International Stock Exchange's blue-chip FTSE-100 index slipped 7.2 points to 4,649.2. The German DAX index eased 19.75 points, or 0.45 percent, to 4,362.81 and the French CAC-40 index slipped 0.62 point to 3,897.37.
Traders said local investors adopted a cautious approach to the beginning of the third quarter, as confidence -- already reeling from last week's accounting scandals -- received a further blow from Yell and Focus Wickes shelving their initial public offering plans in London, showing that strong brands and reasonable pricing are not enough to beat a market downturn.
Meanwhile, Merrill Lynch remained cautious on the outlook for the FTSE 100, lowering its year-end target to 5,000, from 5,500. It said markets could rally in the second half of 2002 but earnings estimates remain too high given the weakness of the dollar and the pace of U.K. and European economic activity.
Technology stocks also headed south after brokers at CSFB lowered their price targets for European semiconductor stocks saying sector momentum is fading and an industry-wide upturn is still not in sight.
Earlier in Asia, prices on the Tokyo Stock Exchange ended mixed in lackluster trading as an encouraging survey of corporate confidence was offset by losses in high-tech export issues. Japan's blue-chip Nikkei Stock Average of 225 selective issues, which jumped 360.24 points Friday, slipped 26.40 points, or 0.25 percent, to 10,595.44, well off its best level of 10,677.10.
Analysts said the market opened higher as investors digested the Bank of Japan's June Tankan survey of short-term business conditions.
The Bank of Japan's "tankan" survey showed the index for big manufacturers rose to minus 18 in June from minus 38 in March.
It was better than economists' expectations and the biggest improvement on record.
A wide range of sectors including banks, construction, steel and real estate rode that figure higher, but investor worries about the stronger yen and uncertainty over the near-term course for a volatile Wall Street kept enthusiasm in check, experts said.
Elsewhere in Asia, prices on the Taiwan Stock Exchange fell to their lowest level since last December, knocked down by weakness in technology issues. The Weighted Index sank 184.39 points, or 3.58 percent, to 4,969.32.
Analysts said the drop below the 5,000 level reflected concerns about the technology sector's ongoing manufacturing slump and the blow to market sentiment from American accounting scandals.
Investors were also unfamiliar with a new revamped trading system at Taiwan's main and over-the-counter stock exchanges. The system changes, introduced Monday, are aimed at enhancing transparency to better reflect supply and demand of listed securities.
Elsewhere in the Pacific region, prices ended slightly higher on the Australian Stock Exchange as local investors repositioned themselves at the start of a new financial year. The blue-chip All Ordinaries Index rose 12.40 points, or 0.4 percent, to 3,175.70.
Media giant News Corp., the major miners, and the top telecommunications carrier Telstra Corp. drove the market higher, while investors switched out of banks.
Banks lost ground as investors moved out of the defensive stocks.
Meanwhile, markets in Hong Kong were closed in observance of the fifth anniversary of the former British colony's reversion to Chinese rule. Trading will resume on Tuesday.
Markets in South Korea were also closed in honor of the conclusion of the World Cup soccer tournament, which was contested in South Korea and Japan. Trading will also resume on Tuesday.
