> it won't last long.
Gst, We'll have intel earnings out next and they should be a blow out.
Intel should show about $2bil in investment income. The market has in place one more 25 basis point increase.
I think we continue to rock due to positive investor sentiment.
>BLOOMBERG NEWS
July 16, 2000
NEW YORK -- Investors stors are so enthusiastic about technology stocks again that they're even willing to buy shares of companies that aren't making money yet.
Ariba, which makes software to help companies trade merchandise on the Internet, gained 35 percent last week, helping to fuel the Nasdaq composite index's 5.5 percent rally.
Competitors also soared: Commerce One surged 79 percent, VerticalNet gained 34 percent and Freemarkets advanced 22 percent.
All four companies sold shares to the public for the first time last year, and none is profitable.
"Investors again have confidence that while the earnings aren't there today, the rewards are going to be there in the future," says Andrew Cupps, who last week added to his holdings of Commerce One and VerticalNet. "Business in these companies is booming, better than any analyst predicted."
With the week's rally, the Nasdaq is up 4.3 percent for the year. The Standard & Poor's 500 index rose 2.1 percent for the week and the Dow Jones industrial average rose 1.7 percent.
All three indexes rose for the third week in a row, the first time that's happened this year.
The gains left the S&P 500 down just 1.1 percent from its March 24 record, while the Dow average is 7.7 percent from its Jan. 14 high.
One index did set a record last week: the S&P MidCap 400, which is up 16 percent in 2000.
Ariba jumped after the company said Wednesday that sales surged sevenfold in its third quarter and that it lost 5 cents a share, less than the 8 cents analysts had been expecting.
Like many other profitless Internet companies, Ariba shares had slid in March, April and May as investors became worried that the economy was slowing.
Ariba is down 32 percent from its March 8 peak of 183 11/32, but its low in May was down 73 percent from the high.
"We've had a vigorous bounce off extreme lows" in business-to-business e-commerce stocks, says Mike Sandifer of Amerindo Investment Advisors in New York. The firm has added to its holdings of Ariba and Akamai Technologies, whose services speed the delivery of content on the Internet.
The rally in Internet stocks got is first push last week from Yahoo!, a profitable company that reported a doubling of revenue in the second quarter.
Yahoo, which reported its earnings Tuesday after exchanges closed, rose 18 percent Wednesday and 9.9 percent for the week. The stock had fallen 29 percent in the three weeks prior to the earnings announcement.
The Nasdaq composite now has gained 33 percent since its low on May 23, though it's still down 16 percent from its all-time high on March 10.
While technology companies posted the biggest gains, industrial companies also rallied on earnings.
Alcoa, the best performing stock in the Dow average last week, gained 17 percent after reporting a 57 percent increase in second-quarter profit. The stock set a 52-week low July 7.
International Paper rallied 14 percent after surprising analysts with a tripling in quarterly earnings. Even so, it is down 37 percent this year and has performed worse than all of the members in the Dow average except for Procter & Gamble.
The best performer in the S&P 500 was Paine Webber Group, which rose 53 percent. UBS, Europe's third-largest bank, has agreed to buy Paine Webber, which is the fourth largest U.S. retail brokerage.
Lehman Brothers Holdings rose 19 percent as investors bet that Lehman, one of a shrinking number of independent securities firms, could be a takeover target.
Rite Aid posted the biggest drop in the index, falling 33 percent for the week, after the company said earnings for the past two years had been overstated.
J.P. Morgan, which gained 10 percent, also was being viewed as a takeover possibility, and it reported on Thursday that its second quarter earnings grew 7.5 percent.
Government reports during the week did little to change the view that the economy is growing steadily with low inflation, which is a recipe for persistent profit growth for most companies.
Retail sales rose more than expected in June and a previously reported decline in May was revised to a gain. Still, wholesale prices excluding volatile food and energy prices unexpectedly fell last month.
The decline in producer prices, the first in five months, might prompt the Federal Reserve to refrain from raising interest rates much more this year.
"It's another link in the chain of evidence that tells us it's possible the Fed has pulled it off -- tightened enough to keep inflation in check, but not enough to choke off growth, as we can see from this earning season," says Maureen Allyn, chief economist at Scudder Kemper Investments.
"We can celebrate higher profits without worrying the Fed is going to raise interest rates (much more)," she says.
Allyn is forecasting one more quarter-point increase next month. The Fed has raised rates six times since June 1999.
This week, investors will be watching the government's report on consumer prices, due Tuesday, for further evidence of a slowing economy that could prompt the Fed to forgo a rate increase.
Analysts are expecting that the consumer price index rose 0.5 percent in June, while the index excluding food and energy rose 0.2 percent.
Also due this week: earnings from more than 200 companies. The results so far point to another quarter of growth of more than 20 percent in operating profit for the companies in the S&P 500.
Combining earnings already reported from the companies in the index and consensus analyst estimates for those that haven't yet reported, year-over-year earnings growth for the second quarter is expected to be 19.1 percent, according to First Call/Thomson Financial. This number has been rising, though.
Anthony Crooks, a research analyst at First Call, says earnings growth will be 23 percent when all reports are in.
That will be "even more impressive" than the first quarter's 23.6 percent growth, Crooks says, since the 1999 second quarter was strong, presenting many companies with tougher comparisons.
Microsoft reports Tuesday, while a parade of banks report the first two days of the week, including Citigroup, Chase Manhattan and Bank of America.
Major airlines will announce results, as will Coca-Cola, Johnson & Johnson, Intel, General Motors, Ford and Boeing. |
