U.S. Stocks Rally, Led by EMC; Nasdaq Has 5th-Biggest Surge
from Bloomberg:
By Robert Dieterich
New York, Dec. 22 (Bloomberg) -- U.S. stocks rallied, led by EMC Corp. and Cisco Systems Inc., on optimism the Federal Reserve will soon cut interest rates, sparking faster profit growth.
The Nasdaq Composite Index surged to the fifth-largest gain in its 29-year history, led by Qualcomm Inc. and Sun Microsystems Inc. Of 81 technology stocks in the Standard & Poor's 500 Index, 73 gained.
Stocks advanced ``on the recognition that the Fed is moving inexorably to lower interest rates,'' said Marshall Front, who manages $2.5 billion at Front Barnett Associates LLC in Chicago. Lower rates will spur growth in the economy and earnings.
Front said he bought shares of EMC, Cisco, Intel Corp. and Microsoft Corp. last week.
The Nasdaq, which touched a 21-month low Wednesday, climbed 176.90, or 7.6 percent, to 2517.02, extending yesterday's gain. The S&P 500 rose 31.09, or 2.4 percent, to 1305.95. The Dow Jones Industrial Average advanced 148.27, or 1.4 percent, to 10,635.56, led by International Business Machines Corp.
Nasdaq stocks now trade for 98 times recent profit, down from 401 times at their March 10 high. S&P 500 stocks trade for 25 times earnings.
Some investors are betting the Nasdaq's decline, spurred by repeated warnings that sales and profits won't meet expectations in a slowing economy, has left many stocks inexpensive.
`Buy Now'
``You want to be buying now,'' said Chris Guinther, manager of the $350 million One Group Small Cap Growth Fund. ``It is obvious to everyone that things are going to be bad in earnings,'' he said, and that is now reflected in stock prices.
Still, the Nasdaq has now risen 5 percent or more in a day 14 times since its March 10 peak, and each time the rally has been fleeting. The index remains 38 percent lower for the year.
``There's a lot of people that are saying, `Is this the one that's going to stick?''' said Robert Leshman, who runs hedge fund Briar Partners LP.
More than two stocks rose for every one that fell on the New York Stock Exchange. Almost 1.1 billion shares changed hands on the New York Stock Exchange, 1.1 percent below the average for the past six Fridays.
For the week, the Nasdaq fell 5.1 percent and the S&P 500 0.5 percent, while the Dow climbed 1.9 percent. U.S. stock markets are closed Monday for Christmas.
Cisco Gains
Cisco, the world's biggest computer-networking company, rose $2.63 to $41.50. The stock had fallen 29 percent from Dec. 11 through yesterday. Ciena Corp., which makes products used in fiber- optic networks, jumped $17.13 to $77, having dropped 49 percent over the same eight-day period.
Microsoft advanced $3 to $46.44; it is down 60 percent this year. EMC surged $9 to $68.25, and Qualcomm gained $9.19 to $85.
IBM gained $7.44 to $89. The biggest computer maker's shares fell 21 percent from Dec. 5 through yesterday amid speculation that the company will join other large computer companies in reducing its profit or sales forecast.
Salomon Smith Barney analyst John Jones said such speculation is wrong. Retail sales to individual consumers are only a small part of IBM's business, he said in a note to clients. A slowdown in that area has been the main cause of lowered forecasts for other computer makers, he said.
Ford's Fall
Ford Motor Co. dropped $1.38 to $22.81. The automaker cut its first-quarter North American production plan by 17 percent from a year earlier because of slower demand.
Ford also cut its fourth-quarter profit forecast by about 14 percent, saying weather and parts shortages trimmed output. The company had already reduced its outlook for the quarter, at the beginning of the month.
General Motors Corp. fell $1.31 to $50.06.
Litton Industries Inc. rose $15.31 to $77.94. The shipbuilder agreed to be acquired by defense contractor Northrop Grumman Corp. for $5.1 billion in cash and assumed debt, valuing the common shares at $80.
Northrop fell $7.81 to $74.13.
Tiffany & Co. gained $2.88 to $32. Goldman Sachs & Co. analyst Adrianne Shapira raised the jewelry retailer to ``recommended list'' from ``market performer,'' saying the stock is inexpensive given its growth prospects.
International Paper, Alcoa
Investors are becoming convinced the Fed will cut rates before its next meeting at the end of January, said Kevin Bannon, chief investment officer for BNY Asset Management, which has $65 billion in assets. Bannon said the Fed might make its next move a decrease of half a percentage point, not just a quarter point.
Commodity producers, which are particularly sensitive to interest rates, rose.
International Paper Co., the world's biggest paper maker, rose $2.69 to $42.25, while its smaller rival, Georgia Pacific Group, climbed $2.38 to $30.38. Alcoa Inc., the largest producer of aluminum, advanced $3.06 to $34.81, while Dow Chemical Co. gained $2.19 to $37.25.
These stocks gained four out of five days this week on optimism about rates. International Paper rose 13 percent for the week, Georgia Pacific 17 percent, Alcoa 13 percent, and Dow 22 percent.
The Morgan Stanley Cyclical Index rose 4.4 percent today and 7.6 percent this week, its biggest weekly rise since April 1999.
3Com Corp. rose 84 cents to $8.03. The maker of computer- networking equipment reported a fiscal second-quarter loss that was narrower than the reduced forecast it issued earlier this month.
PG&E Corp. rose $1.81 to $20.06 and Edison International gained $1.31 to $16.25, after Standard & Poor's affirmed its ratings on the debt of the companies' two main electric utility subsidiaries, Pacific Gas & Electric and Southern California Edison.
The utilities have incurred $8.1 billion in debt from surging power costs that they aren't allowed to pass on to retail customers. PG&E shares fell 33 percent from the beginning of December through yesterday, while Edison dropped 35 percent.
Harmonic Falls
Harmonic Inc. fell 84 cents to $5.97. The Internet-equipment maker said its fourth-quarter loss may be three times larger than analysts expected as customers such as AT&T Corp. cut spending. Harmonic has fallen 37 percent this week.
OmniVision Technologies Inc. fell $5.84 to $3.66. The maker of semiconductors used in cameras and other imaging devices said it expects to lose 60 cents to 70 cents a share in the year ending April 30. It had expected profit of 38 cents to 40 cents a share.
Merrill Lynch & Co. fell 44 cents to $63.56. The largest U.S. brokerage will cut jobs in its stock and bond research departments, the Wall Street Journal reported. The cuts come amid a stock market slump that is cutting into profits at securities firms.
Merrill was the only firm to decline among the 13 members of Amex Securities Broker/Dealer Index, which climbed 3 percent. Goldman Sachs Group Inc. rose $5 to $98.81, and Morgan Stanley Dean Witter & Co. gained $2.25 to $74.25.
SuperGen Slides
SuperGen Inc. slid $3.50 to $12.88, giving it a 38 percent decline since Monday. The drugmaker said its chief financial officer and head of commercial operations both will resign in 2001, bringing to four the number of top executives who have quit this year.
Prudential Vector Healthcare Group analyst Peter Drake cut the stock to ``sell'' from ``hold.'' ``We find it highly suspect for these managers to leave'' just before the company submits its lead product for regulatory approval, Drake wrote in a note to clients.
The Nasdaq's rally may have been helped today by a trailing off in selling done to book tax losses before the end of the year. Tax-loss selling helped limit the Nasdaq's gains yesterday, investors said, as traders tried to get things done well ahead of the holiday weekend and the quiet period between Christmas and New Year's.
The Nasdaq also got a boost today because no major technology company said it would miss its sales or profit forecast. ``We didn't have any more bad news today,'' said Guinther of the One Group Small Cap Growth Fund.
Best Regards, J.T. |
