Stocks Sputter to End Day Mixed

Blue-chip stocks scraped out gains Tuesday as worker productivity raced ahead at its fastest clip in almost 19 years. But the broader market slumped after the Federal Reserve stood pat on interest rates and reinforced investors’ fears of a tepid economic recovery.

“I don’t think it is a bear market. It is a crisis of confidence,” said Stanley Nabi, managing director at Credit Suisse Asset Management. “We are burdened with a lot of problems, particularly in the area of technology and telecoms.”

Stocks weakened in the last half hour of trading and pushed the Nasdaq composite index into negative territory, stretching the tech-laden index’s losing streak to five sessions.

Investors, shaken by Monday’s strong sell-off, held off on making large bets ahead of quarterly earnings from Cisco Systems, the world’s biggest maker of the gear that powers the Internet. Cisco reported after the market closed that quarterly profit more than tripled last year’s weak results and beat Wall Street estimates.

In after-hours trading, Cisco shares jumped to $14.70 after closing at $13.08, up 13 cents, in regular trading. The Nasdaq 100 after-hours indicator rallied more than 2.3%, boding well for today’s market.

The blue-chip Dow Jones industrial average rose 28.51 points, or 0.3%, to 9,836.55, failing to hold on to an earlier 111-point gain. The Nasdaq lost 4.66 points, to 1,573.82, also shedding earlier gains. The broad Standard & Poor’s 500 index slipped 3.18 points, or 0.3%, to 1,049.49.

Losers beat winners by 9 to 7 on the New York Stock Exchange and 10 to 7 on Nasdaq. Trading was active.

The Nasdaq has fallen 7.3% over the last five trading days and is now down 19.3% for the year, having lost ground in seven of the last eight weeks on fears that weak spending by corporate customers has stunted growth across most of the technology industry.

“There’s definitely concern with the precipitous decline we’ve had,” said Robert Cohen, a head trader for Credit Suisse First Boston. “It’s not encouraging.”

Pharmaceutical stocks were the biggest drag on the S&P; 500 after Senate Democrats introduced legislation that would limit tax deductions for marketing to what drug makers’ spend on research. Johnson & Johnson declined $1.68 to $60.42, Wyeth fell $1.19 to $53.99, and Bristol-Myers Squibb dropped 83 cents to $28.01. Pfizer lost 80 cents to $35.75.

Fed policymakers voted unanimously to keep the key federal funds rate for overnight loans between banks at 1.75%--helping along the patchy economic recovery with cheap borrowing costs for consumers and businesses.

However, the Fed policymakers cited an uncertain outlook for spending growth and said risks remained balanced between inflation and recession. Many analysts now say it is unlikely the Fed will begin raising rates before August at the earliest.

An 8.6% surge in worker productivity had helped lift the market before the Fed decision. Productivity grew in the first quarter at the fastest rate in almost 19 years as firms squeezed more out of their work force instead of adding new hires in the tepid economy, the government said.

In other market news:

* Insurers were the second-biggest losers on the S&P; 500. MetLife dropped $2.29 to $31.86. Including money the biggest U.S. life insurer set aside to cover the expected settlement of a Medicare probe, earnings were below analyst expectations and some investors said they are skeptical the company can meet 2002 estimates. American International lost $1.90 to $67.65. The decline in insurance shares follows comments investor Warren Buffett made at Berkshire Hathaway’s annual meeting over the weekend in which he discussed potential losses from future terrorist attacks.

* Semiconductor designer Broadcom tumbled 17%, or $5.22, to $24.72 after Motorola, a major customer, selected a competitor to create its next-generation cable modem.

* Georgia-Pacific climbed 5 cents to $29.85 after saying it plans to split into two and sell stock in its consumer products and packaging business as part of a spinoff from its building-products unit, which is plagued by asbestos liabilities.

* Leading grocery supplies distributor Fleming jumped $2.38 to $24.83. The company posted an increase of nearly 60% in quarterly profit as improved business efficiencies and cost controls helped results.

* Manugistics Group, which had been one of the few bright spots in the business-to-business software sector, plunged 33% after executives said quarterly license revenue was running slightly behind their target. Its stock ended down $4.05, or 33%, at $9.11.

Market Roundup, C8-9