Rally-ho!
March comes in like a bull as investors cheer end of a factory slump.
March 1, 2002: 4:47 p.m. ET
By Staff Writer Jake Ulick
NEW YORK (CNN/Money) - Signs that the hard-hit manufacturing sector finally turned a corner launched a powerful U.S. stock market rally Friday that sent the Dow Jones industrial average to a six-month high.
The Nasdaq composite index also soared, narrowing its year-to-date loss, after the Institute of Supply Management said its factory-activity index snapped an 18-month slump.
The Dow industrials jumped 262.73 points, or 2.6 percent, to 10,368.86, for its best finish since Aug. 27 and its biggest point-gain in five months. All 30 stocks rose on the Dow, which jumped 4 percent on the week, widening its 2002 gain to 3.5 percent.
The Nasdaq composite index rallied 71.26, or 4 percent, to 1,802.75, gaining 4.5 percent over the last five sessions but still 7.6 percent lower on the year.
Down 1.5 percent in 2002 and up 3.9 on the week, the Standard & Poor's 500 index rose 25.05, or 2.3 percent, to 1,131.78.
Stocks rose right from the start after the government said January consumer spending and personal income both topped forecasts. And the major indexes extended those gains when the ISM index's big February surge pointed to a swift, shallow recession.
"What we're seeing in the report is clear signs that manufacturing has turned," Bruce Kasman, economist at J.P. Morgan Chase, told CNNfn's Market Call. "And I think it's turned pretty sharply."
Friday snapped a string of failed afternoon rallies. But worries that stocks are too expensive relative to the profits outlook could keep them from moving much higher this month.
"We think the valuations still can not be justified," Peter Doyle, chief investment strategist at Kinetics New Paradigm Fund, told CNNfn's Street Sweep.
More stocks rose than fell. On the New York Stock Exchange, advancing stocks topped declining ones more than 2-to-1 as 1.4 billion shares traded. Nasdaq winners beat losers nearly 2-to-1 as 1.8 billion shares changed hands.
In other markets, Treasury securities fell, sending yields higher, as traders bet the strong economic data will force the Federal Reserve's first interest rate hike since May 2000. The dollar gained against the euro and slipped versus the yen. Oil and gold prices rose.
Full steam ahead
The ISM index jumped to 54.7 last month for its first reading above 50 since July 2000, signaling that factory output is no longer contracting.
Ian Shepherdson, chief U.S. economist at High Frequency Economics, said the survey suggests that gross domestic product could accelerate 4 percent year-to-year by this summer. "The only soft spots in the survey remain inventories and employment, but they will recover," he said.
The numbers come during a week when durable goods orders, Midwest manufacturing, and fourth-quarter economic growth all showed surprisingly resiliency.
Alan Greenspan earlier this week was cautiously upbeat. The Federal Reserve Chairman told a House panel to expect economic growth this year at a pace much below that of the late 1990s.
Investors have tried to anticipate the rebound, pouring money into manufacturing-related stocks such as 3M (MMM: up $2.39 to $120.32, Research, Estimates), DuPont (DD: up $1.02 to $47.86, Research, Estimates) and Caterpillar (CAT: up $0.89 to $56.40, Research, Estimates) during the last several weeks.
Friday's best gainers were technology stocks -- including IBM, (IBM: up $4.90 to $103.02, Research, Estimates), Intel (INTC: up $2.43 to $30.98, Research, Estimates), and Microsoft (MSFT: up $3.03 to $61.37, Research, Estimates), whose chairman, Bill Gates, once again topped Forbes' most-rich list.
Drug stocks Merck (MRK: up $1.65 to $62.98, Research, Estimates) and Johnson & Johnson (JNJ: up $1.20 to $62.10, Research, Estimates) also rose.
Other economic data Friday showed that consumer spending and personal income both rose 0.4 percent in January, while January construction spending advanced 1.5 percent.
The only disappointment came from the University of Michigan, which said its final report on February consumer sentiment fell below forecasts. Worries about the job market sent another measure of consumer confidence to a surprisingly large drop in February, the Conference Board said earlier this week.
Concerns about profit strength surfaced. Nasdaq's biggest loser, biotech equipment maker Invitrogen (IVGN: down $11.52 to $34.12, Research, Estimates), said it sees first-quarter pro forma profit coming in below Wall Street estimates of 48 cents per share.
Credit Suisse First Boston cut its estimates on Protein Design Labs (PDLI: down $0.93 to $14.94, Research, Estimates), a drugmaker, which forecast it will lose money this year. Wall Street expected a profit.
NYSE's steepest decliner, PerkinElmer (PKI: down $7.25 to $15.75, Research, Estimates), a maker of scientific instruments, cut earnings forecasts and said would eliminate 500 jobs.
Donald Selkin, chief investment strategist at Joseph Gunnar, said that before the market can go higher, investors need to hear companies forecast improving earnings and get beyond the Enron-induced accounting worries that have restrained the Nasdaq this year.
"The market wants to see some proof of earnings growth," Selkin told CNNfn's The Money Gang.
In a sign that the troubled chip industry is beginning to recover, equipment maker Novellus Systems (NVLS: up $5.97 to $48.56, Research, Estimates) said it will lose less money in the first quarter than previously expected. And apparel maker Kenneth Cole (KCP: up $2.79 to $20.75, Research, Estimates) beat Wall Street forecasts with a fiscal fourth-quarter profit of 11 cents a share and guided higher for the current year.
The Federal Trade Commission is set to approve Hewlett-Packard's (HWP: up $0.09 to $20.21, Research, Estimates) planned takeover of Compaq Computer (CPQ: up $0.30 to $10.44, Research, Estimates), sources told CNN/Money. But the pact faces a hurdle in this month's vote by HP shareholders, some of whom dislike the deal. |
