Market Melt-Up from Bloomberg for the MITA archives:
Nasdaq Posts Biggest Gain on Greenspan Comments, Bush Optimism
By Robert Dieterich
New York, Dec. 5 (Bloomberg) -- The Nasdaq Composite Index soared to the biggest gain in its 29 years after Federal Reserve Chairman Alan Greenspan suggested the central bank is prepared to cut interest rates.
Cisco Systems Inc., JDS Uniphase Corp. and Sun Microsystems Inc. led gains in the index, which last week had fallen almost 50 percent from its March 10 record.
Stocks also benefited from a Florida court decision that boosted the odds George W. Bush will become the next U.S. president. Shares of Microsoft Corp., Philip Morris Cos. and other companies thought to benefit from a Bush presidency advanced.
``We were buying this morning, have been buying all afternoon and will continue to buy,'' said Austin Crowe, a portfolio manager with T.O. Richardson Co. in Farmington, Connecticut. ``Greenspan turned on a big green light, and that, combined with the fact that the election is nearly decided,'' prompted the firm to buy stocks, he said.
The Nasdaq surged 274.05, almost 10.5 percent, to 2889.80, its biggest one-day percentage and point gain. After an unprecedented 86 percent rally last year, the index has fallen 29 percent in 2000 as profit growth slowed after the Fed's six interest-rate increases since June 1999.
The Standard & Poor's 500 Index gained 51.57, or 3.9 percent, to 1376.54. The Dow Jones Industrial Average climbed 337.77, or 3.2 percent, to 10,898.72, its biggest gain since March 16, as Minnesota Mining & Manufacturing Co. surged for a second day after announcing a new chief executive.
The `Bottom'
``I would say we have probably seen the bottom, or we're very close to it,'' said Ryan Crane, who helps manage $125 billion at AIM Advisors Inc. in Houston. ``People realize that these stocks are pretty cheap.''
More than two stocks rose for every one that fell on the New York Stock Exchange. About 1.38 billion shares traded on the Big Board, 26 percent more than the three-month daily average and the sixth-most on record. More than 2.47 billion shares traded on the Nasdaq Stock Market, the fourth-most on record.
Greenspan, speaking to a bankers' group in New York, said the U.S. economy has ``moderated appreciably.'' Investors took this to mean the Fed may cut rates early next year to keep the economic slowdown from evolving into a recession.
Greenspan's comments added to a rally that began after a Florida judge's refusal late yesterday to order a recount of almost 14,000 contested presidential ballots in the state. The ruling dealt Vice President Al Gore a defeat in his quest to challenge Texas governor Bush's apparent election victory.
Gore appealed to the state supreme court, and his lawyers said they would view the panel's decision as final, suggesting that uncertainty over the election's outcome will end soon.
Rally's `Catalyst'
The election was a ``catalyst'' today, said Douglas Altabef, who helps manage $650 million at Matrix Asset Advisors Inc. ``With the election behind us it perhaps frees up the Fed to'' lean toward cutting interest rates, he said.
Since Nov. 8, the day after the election, the Nasdaq has moved an average 3.4 percent a day as investors tried to determine the outcome amid a flurry of recounts and lawsuits.
Some investors were cautious about whether the Nasdaq's slide is over.
``It's a very volatile market,'' said James Barrow, manager of the $24 billion Vanguard Windsor II Fund. ``If it can go down a lot in one day, it can go up a lot in one day. I think it's just a bit of a relief, but I don't think anything has really changed much.''
Cisco, Microsoft Gain
Cisco, the No. 1 maker of networking equipment, gained $6.31 to $52.13; JDS Uniphase climbed $9.56 to $68.13; Sun Microsystems climbed $12.88 to $91.75; Veritas Software Corp. jumped $21.44 to $122.19; and Intel Corp. advanced $3.06 to $36.
Investors bet that networking-equipment makers could benefit from the possibility of lower interest rates, which might ease the credit crunch making it hard for small phone companies to purchase their products.
Along with Cisco and JDS Uniphase, Corvis Corp. rose $7.69 to $40, Ciena Corp. jumped $19.63 to $99.81, and Avanex Corp. added $18.05 to $69.44.
Microsoft advanced $3.44 to $59.88. Investors expect the world's biggest software maker to benefit from a more lax approach to antitrust regulation in a Bush presidency.
Philip Morris Rises
Philip Morris rose 88 cents to $38.56, and RJ Reynolds Tobacco Holdings Inc. gained $1.75 to $41.50. Bush said if he were elected president, he wouldn't pursue the U.S. Justice Department's lawsuit against tobacco companies to recover the cost of treating sick smokers.
Drug stocks fell as investors flocked to technology companies. The Amex Pharmaceutical Index has gained 18 percent since the beginning of September as investors sought an alternative to computer-related and telecommunications shares.
While Gore called drug company profits excessive during the campaign, investors said today that drug shares already reflect most gains that may come from a Bush presidency.
Merck & Co. lost $1.94 to $90, Schering-Plough Corp. declined 69 cents to $54.50 and Eli Lilly & Co. dropped 6 cents to $90.38.
3M gained $11.63 to $116.63, after the maker of Post-It Notes and 50,000 other products said it named General Electric Co.'s James McNerney as chairman and chief executive. McNerney is the first outsider to run 3M.
Charles Schwab Corp., Merrill Lynch & Co. and other investment bank and brokerage stocks surged as investors bet their business will benefit if the stock market rallies.
Schwab, the world's biggest discount broker, rose $3.69 to $29.75, while Merrill Lynch, which employs the most brokers of any Wall Street firm, advanced $5.81 to $64.75. The Amex Securities Broker/Dealer Index rose 9.2 percent, with all 13 members gaining.
Nokia Forecast
Nokia Oyj's U.S. shares rose $6.81 to $51.38. The No. 1 mobile-phone maker said it sees 1 billion mobile phone subscribers worldwide by the first half of 2002, earlier than a previous forecast of late 2002. Nokia also extended its forecast for annual sales growth of 25 percent to 35 percent to include 2003.
Motorola Inc., the No. 2 mobile phone maker, gained 63 cents to $19 and LM Ericsson AB's U.S. shares rose $1.31 to $13.63. Qualcomm Inc. rose $9.63 to $99.63 and has now gained 20 percent over the last three days.
One indication of the strength of today's rally and how far some stocks have fallen was that chipmakers Xilinx Inc. and LSI Logic Inc. rose even after saying revenue grew less than expected.
``The market doesn't care'' about the disappointments, said Shannon Reid, manager of the $780 million Evergreen Select Strategic Growth Fund. ``It's like, `OK, we are washed out enough, we are anticipating this.'''
Xilinx advanced $1.88 to $43.56 and LSI gained $2.61 to $20.80. Both said that revenue in the current quarter compared with the prior quarter would grow at about half the rate forecast. LSI also said profit would be 2 cents a share less than forecast.
Xilinx has fallen by half since the beginning of October, while LSI is off 76 percent from its high in March.
Oil Stocks Fall
Oil stocks were among the S&P 500's biggest decliners after crude oil dropped 5 percent, below $30 a barrel for the first time in four months, on concern oil inventory may rise.
Exxon Mobil Corp. slid $2.31 to $88.38, while Royal Dutch Petroleum Co. lost $1.38 to $59.13.
Some investors said declining oil prices bode well for the stock market overall, as this could decrease the chance that inflation will accelerate more than expected.
``A lot of things have come together at once as far as the stock market is concerned,'' said Howard Ward, who oversees the $4 billion Gabelli Growth Fund. ``It seems there'll be a favorable outcome for the election, Greenspan said exactly what the market wanted and oil is down.''
S&P 500 Additions
Software maker Intuit Inc. jumped $5.38 to $50.88 after Standard & Poor's said it will add the company to the S&P 500.
Other companies that S&P said it would add were: Allegheny Energy Inc., an electric company, which rose 63 cents to $43.13; Ambac Financial Group Inc., the second-largest municipal bond insurer, which gained $2.81 to $81.31; and Symbol Technologies Inc., which makes bar-code scanners and rose $2.13 to $42.50.
Shares of companies added to the index typically rise because managers of funds that try to match the benchmark's performance must buy the stocks.
Crown Cork & Seal Co., W.R. Grace & Co., Owens-Illinois Inc. and Bethlehem Steel Corp. will be removed from the index.
3Com, Grocers, Retailers Fall
3Com slumped $3.34, or 25 percent, to $10.03. Telecommunications companies delayed purchases from 3Com during the quarter because of reorganizations and shaky finances, the company said yesterday. 3Com said it will report a loss of 19 cents to 23 cents a share for the quarter ended Dec. 1, compared with an earlier forecast of 7 cents to 9 cents.
Albertson's Inc. fell $1.50 to $22.56 and Supervalu Inc. dropped $3.63 to $13.69. Albertson's, the second-largest U.S. grocer, and Supervalu, which operates Cub Foods and Save-A-Lot, said profit would disappoint investors, citing increased competition among retailers.
Among other grocers, Safeway Inc. lost $2.75 to $55.19 and Kroger Co. fell $1.13 to $24.63. Kroger reported fiscal third- quarter profit from operations of 25 cents a share, matching estimates.
Shares of Talbots Inc. and Limited Inc. fell after UBS Warburg analyst Richard Jaffe lowered his ratings on those and seven other clothing retailers. Talbots fell $1.75 to $49.38, Limited lost 56 cents to $19.25.
Best Regards, J.T. |
