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Wednesday, February 22, 2006 - Page updated at 12:00 AM

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Markets

Economic indicators rise; stocks fall

The Associated Press

NEW YORK — Stocks drooped Tuesday after a robust reading on the economy, minutes from the most recent meeting of the Federal Reserve and the continuation of a solid earnings season cemented the feeling on the Street that additional rate increases are a near-certainty.

The Dow Jones industrial average fell 46.26 to 11,069.06. The Dow rose past Thursday's 4 -year high in opening trading before retreating. Microsoft, one of the 30 Dow stocks, slipped 16 cents to close at $26.54 a share. Boeing, also a Dow stock, added 9 cents to $73.05, continuing its recent string of 52-week highs.

Broader stock indicators also fell. The Standard & Poor's 500 index fell 4.20 to 1,283.04, and the Nasdaq composite index fell 19.40 to 2,262.96.

The sell-off, which followed a higher opening, began after the Conference Board said its Index of Leading Economic Indicators rose sharply in January. The index, a closely watched gauge of future economic activity, is designed to take the pulse of the economy in the near term. It rose 1.1 percent in January, following a 0.3 percent increase in December.

The economic-indicator reading was almost twice as high as analysts expected, providing one more sign that "there's growth still there in the economy, and the Fed's going to have to do its magic by continuing to raise interest rates," said Kim Caughey, equity research analyst at Fort Pitt Capital Group, in Pittsburgh.

Minutes from the most recent meeting of Fed policy-makers underscored the point, with Fed governors saying further rate increases might be needed to keep "continuing upside risks" to inflation in check.

Strong results from Federated Department Stores and Home Depot couldn't distract the market from its interest-rate worries. Less-stellar results from Wal-Mart further dimmed the mood.

Crude-oil futures climbed following militant attacks on oil pipelines in Nigeria. A barrel of light crude settled at $61.10, up $1.22 on the New York Mercantile Exchange.

In recent weeks, investors are again mulling over their chronic worry: Will the Fed raise interest rates so high that the economy will plunge into recession?

There's little to make the Fed stop. Fourth-quarter earnings season is more than 85 percent complete and the Standard & Poor's 500 is on track to beat analysts' estimates for its total returns, according to JP Morgan Chase. Earnings-per-share growth is close to 14 percent, the 15th straight quarter of double-digit earnings growth.

Copyright © 2006 The Seattle Times Company


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