MARKET SNAPSHOT--UPDATE 11:32 AM--Stocks surge amid earnings boom
By Martin Cej, CBS.MarketWatch.com
Last Update: 11:32 AM ET Oct 19, 2000
NEW YORK (CBS.MW) -- U.S. stocks rallied Thursday after Microsoft, the world's largest software maker, beat fiscal first-quarter earnings expectations.
The advance was also underpinned by news that the U.S. deficit unexpectedly shrank in August on record exports. It was the smallest deficit since February and bodes particularly well for technology stocks since two-thirds of the overall improvement in exports came from high tech.
Investors applauded better-than-anticipated profit for Finland's Nokia, the world's No. 1 mobile phone maker. Nokia surprised investors late Wednesday when it reported third-quarter earnings a week early.
The handful of surprisingly robust earnings offset disappointing results from Apple Computer and UAL, and helped alleviate concern that slowing economies and higher energy costs are stunting profit growth entirely.
"People are coming out to the fallout shelters," said Donald Selkin, chief market strategist at Joseph Gunnar. "Some marquee names are carrying this market out of its funk."
Microsoft's profit report is especially good news for investors who own index-tracking stocks or funds, which have been hammered in recent weeks, since Microsoft is one of only two equities that is a member of all three major U.S. stock indexes. Intel, which beat analysts' lowered earnings estimates earlier this week, is the other.
"Microsoft is great news for the market, and Intel should never have been kicked down so far in the first place," Selkin said.
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The Dow Jones Industrial Average ($DJ) jumped 58 points, or 0.6 percent, to 10,038. Wednesday, the world's bellwether stock measure dropped 114.69 points to 9,975.02, closing below the 10,000 level for the first time since March.
The Nasdaq Composite Index ($COMPQ), considered the world's benchmark technology index, rose 160 points, or 5 percent, to 3,332, on course for its first gain in four sessions. The Standard & Poor's 500 Index ($SPX) rose 1.5 percent.
Advancers outpaced decliners by about 2 to 1 on both the New York Stock Exchange and the Nasdaq Market. Volume was heavy in late morning trade as 451 million shares changed hands on the NYSE and 860 million were traded on the Nasdaq.
Microsoft makes a big impression
Microsoft led the rally, surging $7 to $58.75. The company said after the close Wednesday that fiscal first-quarter earnings rose to $2.58 billion, or 46 cents a share, from $2.19 billion, or 38 cents, in the year-ago period. Analysts were expecting earnings of $2.2 billion, or 41 cents a share.
Revenue increased 7 percent to $5.8 billion from $5.4 billion in the year-ago period. The company beat the $5.69 billion in sales Wall Street expected.
Shares of Nokia (NOK) jumped $8 to $38 after the cell phone giant beat earnings estimates and said that it's heading toward "record-breaking" earnings per share in the fourth quarter.
Nokia's report went a long way to settling concern that slowing European economies, a languishing euro and soaring fuel prices will stunt profit growth entirely.
Intel warned in late September that sluggish European economies were slowing its profit growth. Intel then went on to beat lowered earnings estimated earlier this week. Intel shares (INTC) soared 10 percent to $42, on course for its highest close in 12 sessions. The Philadelphia Semiconductor Index ($SOX) surged 12 percent.
Shares of Texas Instruments (TXN) surged $7.88 to $44.75 after it posted third-quarter earnings of $591 million, or 33 cents a share, in line with analyst expectations. A year-ago, TI earned $453 million, or 26 cents a share.
The company cautioned, however, that it doesn't expect revenue in the fourth quarter to exceed the third-quarter's level.
"There is no doubt that earnings growth is on a downward path," Selkin said. "The market is trying to adjust to that, trying to find the proper level to reflect that pace of growth."
Selkin pointed out that about 60 percent of the companies that have reported so far this season have beat expectations. He also said the repeated buying demand that saved the Nasdaq Composite Index from sliding through the 3,000 level recently is a good harbinger of things to come.
"The double bottom that the index hit is being validated by today's move," he argued.
Apple on the sidelines
Among stocks sitting out the rally was Apple Computer (AAPL). The company reported fourth-quarter earnings of 30 cents a share, missing expectations that already were lowered after the computer company disclosed that September showed unexpected slower sales.
Apple also said that revenue in 2001 should come in between $7.5 billion and $8 billion, about flat from this past year, with earnings per share falling within the $1.10 to $1.25 range. Analysts had expected the company to earn $1.73. Apple fell 63 cents to $19.
AOL (AOL) surrendered early gains as some investors decided the stock price overshot the outlook for profit even as the company reported a first-quarter profit of 14 cents a share, a penny ahead of the First Call estimate.
Shares of Sepracor (SEPR) were among the hardest hit, losing almost half their value after Eli Lilly & Co. said it scrapped development of an improved version of the anti-depressant Prozac it had been developing with the company. Sepracor shares plunged $39.81 to 81.
Bonds suffered as investors piled into equities. The benchmark 10-year Treasury note ($TNX) fell 6/32 at 100 12/32 to yield 5.69 percent. On Wednesday, the 10-year yield hit 5.63 percent -- its lowest mark since late May.
The 30-year bond ($TYX) lost 3/32 to 106 19/32 to yield 5.78 percent. |
