U.S. MARKET AVERAGES

U.S. stock markets were dragged downward in the first trading hour as investors locked in their profits from the Tuesday broad buying session when the three major averages rose by at least 1%. The telecom sector is trading down, while the material sector is up.In the first hour of trading, the Dow Jones industrial average fell 0.56, or 0.01 percent, to 10,588.68. On Tuesday, the Dow rose 141.87, its best one-day gain since July 8.

Investors were also cautious about the still uncertain range of consequences to the domestic economy left by Katrina. The first government estimate of Katrina’s impact, released by the Congressional Budget Office, which showed that 400,000 people will be made redundant in the coming months and the economic growth will be 1% down also weighed on the market. But the report made it clear that the impact of Katrina is significant but could be only temporary as gasoline prices have returned to their pre-hurricane levels and consumer spending gained ground.

A few stocks were trading higher in early morning. Best Buy, Shuffle Master , ADTRAN, UNOVA Inc., Maritrans were among the gainers.
Pacific State Bancorp, Gehl, Building Materials Holding Corp. were among the losers.

Bonds fell, with the yield on the 10-year Treasury note rising to 4.12 percent from 4.09 percent late Tuesday.

MOVERS AND SHAKERS

Hewlett-Packard rose 2% after UBS raised its view on the company to buy from neutral.

Albertson's Inc. is expected to fall due to its earnings from continuing operations that fell short of analysts' estimates. On Tuesday, the stock rose 1.5%.

Alnylam Pharmaceuticals Inc. was up 30% after Swiss drugmaker Novartis agreed to buy a 19.9% stake in the company.

Ventiv Health plans to buy privately-held healthcare marketing firm inChord Communications. The company advanced 1.2% on Wednesday.

Time Warner Inc. rose 0.8% on Wednesday after receiving a vote of confidence from the world's fifth-richest man, Saudi Prince Alwaleed bin Talal, who is also an investor in the company.

Genentech Inc. was down 1.4% in pre-market trading after Friedman Billings Ramsey downgraded the company to market perform from outperform.

Yum Brands rose 1.9% after it was upgraded by UBS and Bear Sterns to buy from neutral.

ECONOMIC NEWS

The Department of Labor released a revised 2Q productivity report, showing 1.8% growth from originally reported 2.2%, compared with 3.2% in the firs quarter. Economists had expected a downward revision of 2.1%.

The downward revision reflected smaller than previously reported growth in productivity in the manufacturing sector. The report showed that productivity growth in the manufacturing sector was revised down to 3.6 percent from the 4.1 percent growth previously reported.

The report also showed that unit labor costs rose by 2.5 percent in the second quarter, up from the 2.2 percent growth reported for the first quarter. Economists had expected a more modest increase of about 1.5 percent.


INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks closed higher, gaining on continuously falling oil prices which dropped to $65.96 a barrel and reduced fears of the impact of energy costs on major export markets. The Japanese Nikkei gained 0.1%, lifted by exporter issues with Sony up 2.1%, TDK Corp. 1.65%, and Suzuki Motor also up 1.2%. Hong Kong’s Hang Seng rose 0.4%, South Korea’s Kospi added 1.8%, and Australia’s All Ordinaries climbed 0.8%. The dollar bought 109.46 yen.