Stocks were tentatively higher today, gaining on encouraging economic news but still held back by investment banks' downgrades of several high-profile companies.
The market gave up most of its earlier gains, achieved thanks to a better-than-expected report on the economy and hopes that future interest rate cuts will further stimulate business.
At 1 p.m., the Dow Jones industrial average was up 6.44 at 10,603.11. The Nasdaq composite index rose 9.27 to 2,001.93, while the Standard & Poor's 500 index advanced 4.55 to 1,217.15.
Investors were somewhat heartened after hearing that the Conference Board's Index of Leading Economic Indicators rose 0.5 percent in May.
Meanwhile, investors were listening carefully to testimony by Federal Reserve Chairman Alan Greenspan before the Senate Banking Committee. The market was waiting to see if Greenspan would indicate whether the Fed will lower interest rates as expected for the sixth time this year when it meets next week.
In his testimony, Greenspan said the weakened economy has caused an increase in bad loans, which in turn has made bankers more cautious about lending. He also noted weakness in several industries: health care, telecommunications, retailing, manufacturing and California utilities.
Wall Street was hoping that Greenspan would recognize the depths of the economy's problems and will support another rate cut.
"He is saying what we need to hear," said Arthur Hogan, chief market analyst at Jefferies & Co.
The Dow's advance was limited by 3M, which fell $2.89 to $117.47 after ABN Amro reduced its rating on the company, citing a too-high stock price and a lack of earnings momentum.
Blue chips were boosted largely by safer sectors -- a sign that investors remain nervous about the economy and the market -- like pharmaceuticals and financials. Eli Lilly rose 74 cents to $79.45, while J.P. Morgan Chase was up $1.04 at $45.56.
The tech sector was taken slightly higher by Intel and Oracle, both of which have made bullish comments this week on their business. Intel rose 13 cents to $26.80. CEO Craig Barrett said in a CNBC interview he still foresees a turnaround in the second half of 2001.
Software maker Oracle was up 52 cents at $17.28. On Monday, Oracle executives told analysts that its sales outlook in the United States looks much healthier than three months ago.
But technology gains were limited somewhat by a string of downgrades of computer storage stocks by Merrill Lynch. Network Appliance fell 65 cents to $12.64, while Sun Microsystems slipped 33 cents to $14.33.
AOL Time Warner gained $1.56 to $51.40. The company, whose businesses include Cable News Network, the America Online Internet service and Time magazine, said it will meet cash-flow and sales forecasts for 2001.
Class B shares of Viacom, which owns the CBS, MTV and Showtime networks, rose $1.90 to $52.90; Disney, parent of ABC television, climbed 42 cents to $29.27; and GE gained 88 cents to $49.75.
Northwest Airlines Corp. fell 20 cents to $24.01 and UAL Corp. slipped 95 cents to $30.77. Both companies said they would report losses this quarter, in part because of rising fuel costs.
Qwest Communications International fell $2.44 to $28.83 Morgan Stanley Dean Witter analyst Simon Flannery lowered his 2002 revenue-growth forecast to 13.1 percent from 14.7 percent because of a "deteriorating economic and industry environment" and because of the company's accounting practices.