Surprise from Microsoft has Nasdaq feeling the love
The Australian Financial Review
By Aaron Patrick, New York
2000-10-21 02:54:30
Microsoft rescued the US sharemarket on Thursday, with the software manufacturer producing a profit result that sent the Nasdaq stockmarket up a huge 7.8 per cent, its third largest gain ever.
The recovery capped a remarkable week in US equities - the Nasdaq hit a low for the year, the Dow Jones Industrial Average plunged 435 points in one morning and closed below 10,000 points on Wednesday.
Thursday's rebound was triggered by better-than-expected third-quarter profit results from Microsoft, Nokia and Sun Microsystems, which eased much of the earnings fears stalking the market for the past two months.
Comments from the Federal Reserve chairman, Dr Alan Greenspan, also helped sentiment when he suggested there were no economic factors that would cause the central bank to raise interest rates soon.
The Nasdaq Composite rose 247 points to 3418 - producing the second of its three largest gains in one week and prompting one commentator to quip that the index was "feeling the love". The technology bellwether has risen 13 per cent in two days. The Dow rose 1.7 per cent, to 10,142.
The gains were driven by one of the world's largest companies, Microsoft, which rose 20 per cent after reporting strong sales of its flagship product, the Windows 2000 operating system.
Microsoft's result was one of the first high-profile positive surprises to emerge from an earnings season dominated by downgrades, and added psychological weight to evidence showing the slowdown in US earnings was moderate.
Another important signal came from Nokia, which boosted profit 40 per cent and demonstrated that Motorola's recent poor result reflected loss of market share and not a slowdown in the mobile telephone industry.
"The earnings pre-announcement period is over, and now we are getting to a period of healthier earnings news, which is lifting the spirits of investors," said Mr Thomas Galvin, chief investment officer at Donaldson Lufkin & Jenrette.
Experts said the huge volatility partly reflected the popularity of day trading in the US, and fund adjustments by institutions trying to reduce capital gains before the end of the October tax period.
One week into the earnings season, US corporate profits look strong, with about 60 per cent of S&P 500 companies exceeding expectations. However, further volatility is likely next week if large stocks do not meet expectations.
Despite Thursday's gains, the market remains well down for the year. The Nasdaq has fallen 16 per cent and the Dow is off 12 per cent. Many individual stocks have taken much larger losses, including Microsoft, which has lost half its value since December. © This material is subject to copyright and any unauthorised use, copying or mirroring is prohibited.
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