Wall St report: Wednesday close

RISING fears of a double dip in the US economy left investors in two minds. The Dow Jones Industrial Average closed up 56.56 points or 0.65% to 8736.59 after Monday's 31-point drop broke the biggest four-day bull run since 1933. The Dow had been down 150 points earlier in the day. The Nasdaq eased 15.92 points or 1.18% to 1328.27.

Washington prompted early selling when it stoked fears that the world's biggest economy could be headed back into recession. Official statistics showed the recession of 2001 deeper and longer than previously reported. The recession dragged on through three straight quarters and the economy's rebound was weaker, revised figures showed.

Growth in gross domestic product for the first quarter of this year was revised down from 6.1% to 5% and growth in the second quarter came in at just 1.1%, far below the 2.3% tipped by economists.

Much of the weakness was attributed to more cautious consumers, a major force in an economy in which personal consumption provides two-thirds of economic activity.

Adding to economic uncertainty was a report by the Chicago purchasing managers showing that their index fell to 51.5% this month from 58.2% in June, indicating that the manufacturing sector was also retrenching.

Steven Gallagher, chief economist at investment firm Bear Stearns, said the data indicated that the 'loss in confidence' in corporate America was taking its toll on consumers and investors. 'This makes us more cautious,' he said. 'It does increase the possibility of a double dip in the economy, although I don't think that will happen right now.'

Mark Vitner, senior economist for Wachovia Securities, said: 'We were expecting at least two negative quarters, and the fact we had three is a little bit of a surprise. That helps explain why we're having so much difficulty generating some positive momentum right now. The economy was weaker than we had thought.'

The data weighed on shares that had been among the leaders of the recent rally early in the session, but many of those staged a late-day rally on what at least analyst called 'end of month short-covering.' Aluminium company Alcoa rose $1.07 or 4% to $27.05, Hewlett-Packard tacked on 29 cents or 2% to $14.15 and General Electric finished the day ahead 60 cents or 2% to $32.20.

Consumer-sensitive shares also erased early losses with Wal-Mart closing up fractionally at $49.18.

AOL Time Warner, the media giant, resumed its descent, sliding 90 cents or 7% to $11.50, as it confirmed reports that the US Justice Department was looking into its accounting. Citigroup, which had been under pressure partly due to its exposure to collapse energy trader Enron, came off 41 cents or 1.2% to $33.54.

Graphics chipmaker nVidia dropped $5.15 or 32% to $11.07 after it warned its business was weaker than expected due to soft personal computer sales. IBM lost $1.39 or 2% to $70.40 after announcing it was paying $3.5bn (£2.33bn) for PricewaterhouseCooper's consulting business.

Bio-pharmaceuticals giant Amgen closed flat at $45.64 on an adverse ruling from a British court on a patent for its anaemia drug Erythropoetin. Pharmaceuticals company Eli Lilly recoupled an early drop to close steady at $58.42 despite a downgrade by Merrill Lynch. Rival Merck staged a similar recovery to finish the day higher by $1.09 or 2% to $49.60 after it withdrew an initial public offering for its Medco subsidiary.