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Dow Ends Up 227; Nasdaq Up 100

March 21, 2000

NEW YORK (AP) _ Stock prices bounded higher today amid growing confidence that the Federal Reserve is just about done raising interest rates in its battle with inflation.

The Dow Jones industrial average rose 227.10 points to close at 10,907.34 today.

The technology stocks that dominate the Nasdaq composite index benefited most from the Fed’s announcement of a quarter-percentage point increase. The Nasdaq rebounded from an early loss of as much as 100 points to finish up 100.79 at 4,710.79.

The market gathered momentum after the Fed confirmed Wall Street’s expectation of a quarter-percentage point increase in short-term interest rates. Today’s rate increase, the Fed’s latest strike against inflation, is the fifth since last June.

The Standard & Poor’s 500 rose 37.24 to 1,493.87.

Advancing issues outnumbered decliners by an 11-to-7 margin on the New York Stock Exchange, with 1,810 up, 1,161 down and 504 unchanged.

NYSE volume totaled 1.05 billion shares as of 4 p.m., vs. 912.92 million in the previous session.

The Russell 2000 index of smaller companies rose 0.89 to 550.09.

Along with its announcement, the Fed said ``risks are weighted mainly toward conditions that may generate heightened inflation pressures in the foreseeable future.″

This statement does not guarantee there will be future rate increases, but it does put financial markets on notice that the Fed remains worried about inflation. Still, market analysts said that with scattered evidence that the economy is slowing, investors are becoming increasingly confident that the Fed’s long cycle of rate increases is almost over.

``The central bank’s credibility is very high right now,″ said Chris Conkey, chief investment officer at Evergreen Investment Management in Boston. ``The news of an increase was already factored in, and there’s a strong sense that the Fed is on top of things.″

Financial stocks that are most sensitive to inflation led the Dow’s advance. American Express and J.P. Morgan rose.

Cyclical companies, which fare best when the economy is strong, were also higher.

``There’s been a real resurgence in the more cyclical parts of the market, and that’s a strong statement in favor of what the the Fed is doing,″ Conkey said.

Philip Morris rose after the Supreme Court ruled the government lacks authority to regulate tobacco as an addictive drug. The ruling means that the U.S. Food and Drug Administration cannot regulate tar and nicotine levels in cigarettes, label them as drugs or dictate how they should be marketed unless Congress passes specific legislation to allow it to do so.

Loews Corp. rose and R.J. Reynolds rose.

The Nasdaq, which has slumped in recent sessions as investors took profits from its sprint to new levels earlier this month, turned higher on the strength of its largest companies. Cisco Systems and Yahoo! rose.

Still, a handful of Nasdaq stocks posted sharp losses that prevented the index from bouncing back more convincingly. Protein Design Labs plunged after the European Patent Office revoked the claims of its European humanization patent.

MicroStrategy, which lost more than half its market value Monday after revising downward its financial results for 1998 and 1999, continued its slide today.

``The market is continuing to rotate into stocks of higher capitalization,″ said Brian G. Belski, chief investment strategist at George K. Baum & Co. ``This trend is being used as a defensive tactic″ in light of investors’ growing nervousness over smaller, unproven technology companies, he said.

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