Midday Report: Nasdaq Lower Despite Upbeat Economic Reports

A set of reports that show the U.S. economy may be picking up dampened hopesfor more aggressive rate cuts from the Federal Reserve, sending Nasdaqstocks lower on Friday for the third day in a row.

At midday, the Nasdaq Composite Index was down 19.01 at 2,109.85. The mostactive issues were Cisco (Nasdaq: CSCO), down 8 U.S. cents at $18.75, Intel(Nasdaq: INTC), down 50 cents at $28.51, and Ericsson (Nasdaq: ERICY), up 16cents at $6.24.

The U.S. Department of Commerce said retail sales rose 0.8 percent inApril, showing that consumers continued to spend money despite job cutsand other signs of economic weakness. The gain was reportedly more than economists expected, and was the first rise inthree months.

At the same time, the U.S. Department of Labor said its producer price index, agauge of inflation at the wholesale level, showed a rise of 0.3 percent, which was less than economists expected.

Another closely watched barometer of the economy also pointed to strength.The University of Michigan’s index of consumer sentiment reportedly rose inMay, against expectations for a decline.

Rate Cuts Over?

Taken together, the reports suggest there is some life in the economy, andFed policymakers may conclude that their series of rate cuts is providingthe needed boost.

The Fed has ratcheted rates lower in a series of moves this year, andeconomists reportedly are looking for a further cut when policymakers meetnext Tuesday.

If the economy shows resilience, however, the Fed’s rate cutsmay become smaller or cease altogether.

S&P, Dow Tumble

The Standard & Poor’s 500 stock index was down 7.71 at 1,247.47 in middaytrading, and the Dow Jones Industrial Average was down 87.38 at 10,823.06.

The E-Commerce TimesIndex of 15 Internet retailers was also down, showing a 3.95 percent drop at midday.

Homestore.com (Nasdaq: HOMS) was down $4.40 at $28.48, and eBay (Nasdaq:EBAY) was down $1.69 at $52.62.

Ameritrade Gains on Rumor

Meanwhile, online brokerage Ameritrade (Nasdaq: AMTD) picked up 22 cents to$8.18 after a report published in USA Today said that Canadian Imperial Bank of Commerce(CIBC) is in talks to acquire thecompany for $8 to $9 per share, or as much as $1.8 billion.

Internet consultant Proxicom (Nasdaq: PXCM) slipped 28 cents to $7.36 afterCompaq (NYSE: CPQ) said it would not raise its $5.75 per share offer for thecompany, clearing the way for a $7.50 per share buyout by Dimension Data of the UK. Compaq was down 20 cents at $15.90.

Other Internet and tech stocks suffering blows on Friday included IBM (NYSE: IBM),down $2.87 at $112.33 following a Bear Stearns downgrade; NortelNetworks (NYSE: NT), down 65 cents at $14.57 after announcing theresignation of its chief operating officer; and NetZero (Nasdaq: NZRO),down 23 cents at $1.02 after reporting a quarterly loss.

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