U.S. stock prices were mixed Wednesday, amid new indications that the U.S. economy remains sluggish, even after six interest rate cuts. The Dow Jones Industrial Average closed fractionally lower, dropping 12 points to 10,510. The broader Standard and Poor's 500 index gained four points, less than 0.5 percent, while the tech-weighted Nasdaq composite closed two percent higher.
Semiconductors fueled an early rally after Wall Street brokerage firm Merrill Lynch upgraded several chip stocks, saying the worst may be over for the chip industry. However, an analyst at Merrill Lynch conceded the sector is not likely to show any real profit recovery until maybe the second quarter of next year.
Meanwhile, the "blue-chips" went into reverse, weighed down partly, analysts say, by economic data showing slower growth. U.S. manufacturing activity dropped more than expected in July - declining now for 12 straight months.
Experts have somewhat different views on what the data actually mean. Economist Brian Fabbri thinks the slump in manufacturing may be coming to an end. He said, "My interpretation is that we're pretty close to the end of the inventory cycle. And if that's true, then July may well have represented perhaps the bottom in the decline of manufacturing."
But Gordon Richards from the National Association of Manufacturers believes there is more downside in store for manufacturing. He says the problem is capital spending, as opposed to consumer spending. Businesses, generally, are not growing. "Business is not investing heavily," he said. "They've got too much slack right now. So even if consumer spending begins to pull the overall economy out, and inventories reach the end of their cycle, we're still going to see some sluggishness in manufacturing due to weak investment."
In other news, shares of Quaker Oats soared after the U.S. Federal Trade Commission approved the nearly $14 billion purchase of Quaker by Pepsi, the number two maker of soft drinks. Apparently it was a close call. Some U.S. regulators were concerned Pepsi would dominate the sports drink market.
Pepsi will acquire Quaker's popular Gatorade beverage, which commanded a 78 percent share of U.S. sports drink volume last year.