From this morning's NYT:
December 23, 2000 Single-Page Format
Nasdaq Soars to End Brutal Week, but
Weakness Remains
By JONATHAN FUERBRINGER
he Nasdaq composite index jumped 7.6
percent yesterday as bargain-hunting
investors snapped up technology stocks that
had dropped sharply in recent weeks.
It was the Nasdaq's fifth-best daily percentage
gain ever. But because of the hard hit that
technology stocks took earlier in the week,
including a 7.1 percent loss Wednesday, the
Nasdaq was still down 5.1 percent for the
week.
Cisco Systems, which plunged 12.6 percent
on Wednesday after it was downgraded by
Merrill Lynch, rose for a second day, climbing
$2.63, to $41.50. Qualcomm, which had
fallen 11.3 percent since Monday, rose $9.19, to $85. Microsoft, which
had dropped 28.5 percent in the last week and a half, jumped $3, to
$46.44. And I.B.M., which was off 14.1 percent in the last week and a
half, jumped $7.44, to $89.
Among other technology stocks helping lift the three major indexes were
Hewlett-Packard, Sun Microsystems and Oracle.
The Dow Jones industrial average rose 148.27 points, or 1.4 percent, to
10,635.56. The technology-heavy Nasdaq surged 176.90 points, to
2,517.02. The Standard & Poor's 500-stock index climbed 31.11
points, or 2.4 percent, to 1,305.97. The gains came in relatively heavy
volume for the last trading day before Christmas, with 1.09 billion shares
changing hands on the New York Stock Exchange.
I.B.M. rose after a Salomon Smith Barney analyst said speculation that
the computer company would miss its sales or profit forecasts was off the
mark. But the Ford Motor Company dropped $1.38, to $22.81, after it
said Thursday that its fourth-quarter profit would come in about 10 cents
below forecasts of 74 cents a share because of slowing economic growth
and consumer spending.
Yesterday's rebound, however, cannot be read as a signal that the stock
market has finally hit bottom. That still depends on how much more the
economy slows and how quickly the Federal Reserve moves to stimulate
growth by cutting its short-term interest rate target.
"I don't believe that we have seen the bottom," said Thomas McManus,
equity strategist at Banc of America Securities. "The news on earnings is
still very negative, surprisingly negative for an earnings bear, which I have
been for eight months. My numbers are probably too high."
Mr. McManus also said that President-elect George W. Bush's
comments about the possibility of a recession and disagreement from the
Clinton White House are not helpful for consumers or stocks. "It is not
encouraging to see politicians arguing over the state of the economy," he
said.
In addition, investors still have to get through another week or so of
fourth-quarter earnings preannouncements in the first part of January. If
the negative tone of this month's announcements continues, stocks could
be pushed lower.
For the week, the Dow was up 1.9 percent, and the S.& P. 500 index
fell 0.5 percent. With just four more trading days to go in the year, the
Dow is down 7.5 percent, which would be its worst performance since
1981. The Nasdaq is down 38.2 percent, on the way to its worst
performance in its history. And the S.& P. 500-stock index is off 11.1
percent, its worst year since 1977.
While Fed policy makers unexpectedly shifted their bias to cutting
interest rates from raising them at their Tuesday meeting, they have not
yet cut their benchmark federal funds rate from 6.5 percent. The sell-off
in the stock market on Tuesday after the Fed said that it would not
change the rate and again on Wednesday indicated that many investors
were hungering for a cut.
Given the recent signs of the economy's
slowing, more economists and analysts are
saying the Fed will cut interest rates when
policy makers meet at the end of January.
But Mr. McManus said there was talk in the
stock and bond markets now that the Fed
would reduce rates before its scheduled
session at the end of January, given the
rapidity of the economic slowdown. The Fed
rarely moves on interest rates between formal
policy-making meetings. But it has done so,
most recently in the fall of 1998, during the
Russian financial crisis.
"I think the market will definitely be extremely disappointed if the Fed
does not cut rates by Groundhog Day," Mr. McManus said.
Several government reports yesterday added to the portrait of an
economy that has slowed sharply from the 5 percent growth pace of
1999 and the first half of this year. Orders for durable goods rose 2.3
percent in November, after a 6.5 percent drop in October. Although the
increase was a little larger than the 1.5 percent expected, it still reflects
how wary consumers have become.
The Commerce Department also reported yesterday that consumer
spending rose 0.3 percent in November. But much of the increase went
to pay for higher utility bills, which analysts say have been cutting into
spending for household and other goods and holiday gifts.
The Commerce Department reported Thursday that economic growth in
the third quarter slipped to 2.2 percent at an annual rate, the weakest
quarterly growth in four years.
The slowing growth and the prospect of a Fed rate cut before the end of
January helped drive Treasury interest rates lower in a trading session
shortened by a holiday. The yield on the Treasury's 10-year note rose
732, to 1052132, as the yield, which moves in the opposite direction,
slipped to 5 percent, from 5.03 percent on Thursday. That is its lowest
yield since February 1999, when longer-term interest rates were rising
after reaching 30-year lows in October 1998. The yield on the 30-year
bond fell to 5.39 percent, from 5.41 percent on Thursday.
Clearer signs of a slowdown in the United States and the sharp decline in
the stock market also helped the euro to rise against the dollar. From the
inception of the euro in January 1999 until last month, the currency had
fallen as investors preferred to put their money into the United States.
But now the euro has jumped almost 12 percent against the dollar since
its record low in October, including an increase yesterday to 92.52 cents
from 91.43 cents on Thursday. At this level, the euro is already as high as
some forecasters predicted it would rise in 2001. |
