U.S.

Tiptoeing Traders

By CBSNews.com staff CBSNews.com staff

March 12, 2001 / 9:46 AM EST / CBS

Cautious optimism led the Dow Jones higher Monday, but the Nasdaq fell slightly, a possible sign that Wall Street is still hearing the growl of the bears that ravaged it last week.

The Dow closed up 182.75 to 9,687.53 and the Standard & Poor's 500 gained 12.86 to 1,152.69. But the Nasdaq slipped 10.19 to end the day 1,918.49.

While analysts were uncertain as to whether stocks had reached a bottom, they said they were encouraged that buyers finally were dominating sellers.

"The tone is a bit better," said Alan Ackerman, executive vice president of Fahnestock & Co. "Investors appear to be more optimistic for the chances of a short-term rebound."

Ackerman also said investors might have been motivated by analysts' expectations that consumer confidence fell in March. The market is hoping that the prospect of slower consumer spending will encourage the Federal Reserve to lower interest rates before it meets again in mid-May.

In addition, the government reported that new home sales fell 2.4 percent in February, another indication that consumers are cutting back because of the slowing economy.

"The sense is, if consumer confidence goes down tomorrow, that may prompt the Fed to lower interest rates more quickly," said Ackerman. "Consequently, there are some bargain hunters out there as we speak."

The Fed's decision to cut rates a half-point rather than deliver the three-quarter-point cut that Wall Street wanted helped spur last week's sell-off.

Click here for more on economic jitters.

Analysts say that while the markets ended two horrendous weeks with a show of strength on Friday, Wall Street remains quite vulnerable to declines. The Dow closed Friday at 9,504.78, down 1,139.84, or 10.7 percent, during the previous two weeks and 18.9 percent off its peak of 11,722.98, reached Jan. 14, 2000.

There were hints Monday that the markets are not yet out of the woods.

In an interview with the Financial Times, Cisco Systems CEO Jon Chambers said that the U.S. economic slump would continue for "at least three more quarters" and perhaps longer. Chambers told FT that the U.S. economic outlook had deteriorated significantly since Cisco warned in January that it expected the downturn to last for two quarters or more.

"The markets are bouncing, but there is not enough evidence yet to call it more than that," commented Robert Dickey of Dain Rauscher. "This kind of a move is very normal, and the quality of the bounce, in terms of the advance-decline and volume figures, will give a better indication of how solid the recent bottom is."