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Stocks Move Higher, Investors Look at Long Term Prospects - 2001-10-16

U.S. stocks moved moderately higher Tuesday, amid signs that investors moved beyond immediate concerns over terrorism to focus on longer-term prospects for the U.S. economy. The Dow Jones Industrial Average closed 36 points higher, up less than half a percent, at 9,384. The broader Standard and Poor's 500 index gained seven points, under one percent, while the tech-weighted Nasdaq composite moved up 1.5 percent.

There was not a lot of movement in the market. But there was a lot for investors to ponder. Corporate earnings for the third quarter are about as expected in line with estimates, but lower than this time last year.

Some market heavy-weights, such as construction equipment maker Caterpillar, are missing their earnings target. Caterpillar, a Dow component, reported profits down five percent.

Latest on the U.S. economy shows industrial production fell one percent in September, more than Wall Street expected. The manufacturing sector is now in its longest period of contraction since World War II.

Market-watcher Peter Henderson says the market is behaving relatively well, considering the state of the U.S. economy and confusion among financial advisors about how corporate America is really doing these days.

"A lot of portfolio managers really don't like the fact that when they read the corporate reports they really can't tell what operating earnings are because of the accounting practices, not that anyone is doing anything wrong," he said. "But they're having a tough time measuring exactly how well companies are doing. There's still a lot of consumer debt out there and the fact that interest rates are low, people still are not borrowing a lot of money. So there are not a lot of positives you can throw into the equation here. But stocks still are acting very well."

Meanwhile, certain sectors of the economy are suffering more than others in the wake of last month's terrorist attacks. The leisure industry has been especially hard hit. Airlines, hotels, and generally any business associated with entertainment far from home, have expressed concern over their outlook in the shorter term.

Jill Krutick, a leisure industry analyst for the Salomon Smith Barney investment firm, says Americans will continue taking time out for enjoyment. But she says it will be different for a while.

"I think there's a cocooning effect, people spending more time at home and still spending time on leisure activities," she said. "But I think there's going to be a definite fear of getting back on airplanes, which could have implications for the cruise industry, for the ski industry."

Cinemas and movie-rental stores are expected to fare well, as many Americans shift their leisure activity to a more local scene.