Stocks Finish Higher, Extending Rally
Friday May 18, 4:58 pm Eastern Time
By Elizabeth Lazarowitz
<<NEW YORK (Reuters) - Stocks ended higher on Friday, as investors overlooked tepid earnings from Dell Computer Corp. (NasdaqNM:DELL - news) and a dim outlook from hand-held computer maker Palm Inc. (NasdaqNM:PALM - news), to focus on future growth driven by the Federal Reserve's interest-rate cuts.
Growing hopes that the Fed, which cut rates for the fifth time on Tuesday, will prop up the sagging U.S. economy gave Wall Street a boost. The rate cut spurred a rally that extended into Friday's session.
``Investors are more or less saying: 'I know I'm up, but I want to go for a little bit extra,' and I actually see this as a bullish sign,'' said Charles Payne, chief analyst at Wall Street Strategies.
The technology-dominated Nasdaq Composite Index (.IXIC), after struggling near the unchanged mark for much of the session, finished up 5.20 points, or 0.24 percent, at 2,198.88. The broad Standard & Poor's 500 Index (.SPX) rose 3.47 points, or 0.27 percent, to 1,291.96.
The Dow Jones industrial average (.DJI) also zipped higher late in the day, climbing 53.16 points, or 0.47 percent, to 11,301.74. On Wednesday, the blue-chip index scrambled above the psychologically key 11,000 mark for the first time in eight months.
``The mood is cautious, recognizing that there are still some bad earnings coming along,'' said Larry Wachtel, analyst at Prudential Securities. But armed with hopes the Fed's cuts will spur growth, ``there's more of an inclination to live with the realities of today,'' he added.
Top personal computer maker Dell Computer Corp. (NasdaqNM:DELL - news) posted flat earnings and warned its sales would decline from the previous quarter as U.S. corporations tighten technology budgets. Dell shares fell $1.09 to $24.79.
``The Dell earnings in my mind just continue to remind us that we don't have an all-clear signal just yet, and there are still some problems out there, especially in the technology sector,'' said Peter Gottlieb, portfolio manager at First Albany Asset Management.
Palm saw its shares tumble to an all-time low of $4.71 after it slashed its quarterly revenue and earnings estimates because of softening sales of its products. It finished down $2, or 28.37 percent, at $5.05.
And Agilent Technologies Inc. (NYSE:A - news), which makes equipment to test networks, lost $2.72 to $36 after saying quarterly profits fell 42 percent as key orders from the communications and microchip industries collapsed. Agilent said the firm's backlog of orders had either been filled or canceled, so sales would drop sharply in the current quarter and it would post a loss.
On average, operating earnings at S&P 500 companies are expected to fall 11.9 percent in the second quarter from the year-ago period, according to market research firm Thomson Financial/First Call.
Wall Street's climb began on Wednesday, a day after the Fed cut its key fed funds rate, a benchmark for short-term interest rates, by half a percentage point to 4.0 percent. The move bolstered optimism that the economy can rebound in the second half of the year, analysts said. Lower interest rates cut the cost of borrowing and can encourage spending by businesses and individuals alike.
``A lot of people have confidence in the Fed,'' said Bob Basel, a trader at Salomon Smith Barney. ``They're going in the right direction.''
Oil-related stocks chugged higher as talk that President George Bush's energy plan does not sufficiently address short-term supply concerns lifted gasoline and crude oil prices. The American Stock Exchange's Oil Index (.XOI) rose 2.22 percent.
Oil giant Exxon Mobil (NYSE:XOM - news) gained $1.47 to $90.20, and its gains helped curb the blue-chip Dow's decline earlier in the day. Exxon was also the winner in the race for a stake in Saudi Arabia's multibillion-dollar gas development initiative.
Many investors are hopeful that the U.S. central bank's aggressive rate-cutting campaign will boost the economy by the end of this year. The Fed has sliced rates by half-percentage point increments five times this year, most recently on Tuesday. Lower interest rates cut the cost of borrowing and can encourage spending by businesses and individuals alike.
Investors also took heart from a possible purchase of struggling Lucent Technologies Inc. (NYSE:LU - news). The telecommunications equipment maker is in talks to be bought by French rival Alcatel (NYSE:ALA - news) , according to sources familiar with the situation.
``Alcatel possibly taking out Lucent means it is making a bet on (a stronger) economy and stronger IT (information technology) spending,'' said Art Hogan, chief market strategist for Jefferies & Co. ``You don't take out a company that size if you don't have confidence the economy will ramp up.''
Lucent and Alcatel representatives declined to comment. Shares of Lucent gained 14 cents to $9.95 while Alcatel's American Depositary Receipts lost $1.89 to $30.15.
In other earnings news, Gap Inc. (NYSE:GPS - news) dropped after the No. 1 U.S. apparel chain reported earnings fell 51 percent because of a dismal U.S. retail environment and sluggish sales at stores open at least a year. Gap also warned it still expects tough times ahead. It slipped 95 cents to $33.95.
New shares of Global Power Equipment Group Inc. (NYSE:GEG - news) and Instinet Group Inc. (NasdaqNM:INET - news) surged on their first day of trading as public companies. Global Power jumped $11.45, or 57.25 percent, to $31.45, and Instinet climbed $3.15, or 21.72 percent, to $17.65. Instinet is a unit of news and financial data company Reuters Group Plc (NasdaqNM:RTRSY - news; quote from Yahoo! UK & Ireland: RTR.L).>>
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RR: Don't fight the FED and enjoy the weekend with your family...I'm on my way out to go running and then will join some friends for dinner. Who knows, we may even see a movie too...=)
Talk to you soon.
Best Regards,
Scott |
