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Industrials dip red on reports Japan will back US/UK on Iraq

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Stocks dipped back near their lows of the session after Dow Jones reported that Japan, which is not a member of the Security Council has stated that it will back the US/UK and Spanish resolution in the United Nations following chief weapons inspector Hans Blix's report to the U.N next Friday.

Also sending stocks from their best levels of the session was a report that a gunman fired on the U.S. Conulate in Karachi, Pakistan, killing two police and injuring at least five other. Police arrested on of the assailants and confiscated a pistol from him. The man was identified as an Afghan national.

The shooting spree was the first attack targeting U.S. interests in Pakistan since last June, when a suicide bomber rammed an explosive-filled car into the wall of the same consulate, killing 12 Pakistanis.

Karachi, a massive port city of 14 million people, has been one of Pakistan's leading centers of anti-Western violence in recent years. Lately, it has been driven by sectarian strife between Sunni and Shiite Muslim sects.

In January last year, Wall Street Journal reporter Daniel Pearl was kidnapped in Karachi while researching Pakistani extremists. A month later, a videotape was sent to U.S. diplomats showed Pearl dead.

There has been a great deal of public outrage in Pakistan over a possible war on Iraq and warnings of violence if President Gen. Pervez Musharraf, a key U.S. ally in the war on terror, backs the United States against Baghdad.

Modest morning selling in the U.S. Treasury markets has turned to a strong round of buying in what looks to be yet another defensive sign from MARKET participants. The March 10-year Treasury futures contract (ty03m) $115'10 +0.3% has jumped to a contract high as the benchmark bond's YIELD ($TNX.X) continues to fall to 3.711% as it has now retraced 80.9% of its October- December move.

Still, while the Dow Industrials (INDU) 7,873 -0.13% has edged lower by 10 points after showing a session best 81-point gain, the broader S&P 500 Index (SPX.X) 839 +0.2% holds a 1.7-point gain, but well off its best levels of 839. The tech-heavy NASDAQ-100 Index (NDX.X) 1,005 +1.07 has given back roughly 8- points of it session high gains, after a brief encounter with its still trending lower 200-day SMA and 50-day SMA's near 1,010.

At the 11:00 intra-day update, Dow breadth was quite positive with 25 components showing gains versus just 5 showing marginal losses, but this very narrow breadth has deteriorated markedly with just 12 components now showing gains versus 18 decliners. Downside leaders now have SBC Communications (NYSE:SBC) $20.60 -2.3% and Boeing (NYSE:BA) $27.27 -2.43% offsetting gains in Intel (NASDAQ:INTC) $17.11 +2.45% and Hewlett Packard (NYSE:HPQ) $15.92 +2.38%.

Volume is just slightly above yesterday's mid-session rate with NYSE volume at just over 708 million shares and on track for a 1.3 million share day, while NASDAQ volume of 738 million is above yesterday's 01:00 717 million level and on track for just over 1.3 million share day.

Market internals on a broader scale than those mentioned in the Dow show mixed results. NYSE breadth is positive at 17:13, while NASDAQ breadth shows decliners barely outnumber advancers by a 15:14 margin.

Improvement is seen in the new highs versus new lows category at both the NYSE and NASDAQ. NYSE shows 45 stocks having traded a new 52-week high compared to just 29 stocks trading new lows, while NASDAQ reports 54 stocks trading a new 52-week high compared to 46 stocks trading new lows.

Jeff Bailey

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