U.S. Stocks Soar on Rate Cut; Nasdaq's 14% Gain Is Its Biggest
from Bloomberg
By Chelsea Emery
New York, Jan. 3 (Bloomberg) -- U.S. stocks soared, driving the Nasdaq Composite Index to its biggest gain, as investors bet the Federal Reserve's surprise interest-rate cut will halt a 10- month slide in share prices.
The Nasdaq surged 14.2 percent, as Cisco Systems Inc., Oracle Corp. and Microsoft Corp. climbed. The value of U.S. stocks grew a total $708 billion, as measured by the Wilshire 5000 Total Market Index. The New York Stock Exchange and Nasdaq Stock Market each had its busiest day.
``The market was looking for a catalyst, and the Fed's move was that catalyst,'' said Andy Damm, who helps manage $4 billion for BlackRock Advisors Inc. in Philadelphia and began adding telecommunications shares after the announcement. ``In the near term, we seem to have found a bottom for the market.''
The Nasdaq advanced 324.83 to 2616.69, erasing a 1.8 percent decline to record the largest percentage and point increases in its 29-year history.
The Standard & Poor's 500 Index gained 64.29, or 5 percent, to 1347.56, led by computer-related and financial shares.
The Dow Jones Industrial Average jumped 299.60, or 2.8 percent, to 10,945.75. Almost three stocks rose for every one that fell on the New York Stock Exchange.
The wave of buying triggered by the Fed's move was enough to catch some floor traders at the NYSE off guard and briefly halt trading in three companies -- Lehman Brothers Holdings Inc., Providian Financial Corp. and EMC Corp. The three shot higher after trading resumed.
``Buy orders came across my desk like crazy, nuts, non- stop,'' said John Wilson, chief executive of Wilson Institutional Services, a floor broker at the NYSE.
More than 1.8 billion shares traded on the Big Board, according to preliminary statistics, while 3.2 billion changed hands on the Nasdaq market. All 25 of the most active U.S. stocks advanced; 98 of the Nasdaq 100 Index's members gained.
Cisco, Oracle, Microsoft Gain
Cisco jumped $8, or 24 percent, to $41.31 and was the most- active stock with 165 million shares traded. According to preliminary figures, that's the sixth-busiest day for a stock trading in the U.S.
Oracle rose $5.63 to $32, Microsoft gained $4.56 to $47.94 and Sun Microsystems Inc. advanced $7.56 to $33.
General Electric Co., the largest company with a value of almost $474 billion, climbed $4.06 to $47.81.
EMC, which fell 18 percent yesterday on concern reduced spending by customers would cut profit, jumped $13.50, or 25 percent, to $67.81.
These six stocks added $205 billion in market value between them.
The half-point rate cut, the central bank's first rate reduction since November 1998, spurred rallies in global stock markets. Germany's DAX index rose 2.3 percent, Mexico's Bolsa Index surged 5.4 percent and Brazil's Bovespa Stock Index gained 7.6 percent.
The rate cut was ``more aggressive than I expected,'' said Michelle Clayman, chief investment officer of New Amsterdam Partners, which oversees $1.1 billion. ``The move is warranted by fundamentals. Yesterday's market (decline) was quite unsettling.''
The Nasdaq's 7.2 percent drop yesterday left the index 55 percent below its March 10 record. After recording it largest annual gain in 1999, the Nasdaq had its worst year in 2000 as a series of rate increases slowed the economy and cut into corporate profits.
Brokers, Banks Rise
Brokerage shares soared as investors bet lower rates and a stock rally will reinvigorate the market for new equity and bond sales.
Lehman Brothers jumped $11.19 to $76.13, Goldman Sachs Group Inc. rallied $15.25 to $115.50 and Morgan Stanley Dean Witter & Co. jumped $11.56 to $83.69.
Bank shares climbed on the prospect of increased lending business. J.P. Morgan Chase & Co., which began trading yesterday after the merger of Chase Manhattan Corp. and J.P. Morgan & Co., climbed $6.63 to $50.63; Citigroup Inc. gained $4.44 to $54.94; and First Union Corp. advanced $2.31 to $30.13.
Still, some investors said the Fed's action indicated the economy had slowed more than they'd previously believed.
It might ``signal a really dire mood out of the Fed -- that (policy-makers) think things are worse than they are,'' said George Cohen, who oversees $4 billion at Cohen, Klingenstein & Marks.
Phone Stocks Rise
Telephone stocks advanced, led by Verizon Communications Inc. and SBC Communications Inc., the No. 1 and No. 2 local phone companies, respectively, as investors flocked to shares of companies perceived to have consistent earnings growth.
``Baby Bells have steady demand and revenues, and have been slow to deploy new tech by virtue of their bureaucracy, so they didn't overextend,'' unlike some new competitors, said Eric Wiegand, equity strategist for Warburg Pincus's private-client group, which has $7.3 billion under management.
Verizon climbed $2.88 to $53.13, while SBC gained 63 cents to $51.
Long-distance carriers' ``valuations have gotten low,'' Wiegand added. AT&T Corp., which trades for 12 times projected earnings, rose $1.88 to $20.13. WorldCom Inc., which has a price- earnings ratio of 12, gained $4.06 to $20. The S&P 500 trades for 26 times expected profits.
Edison Intl, PG&E Drop
Edison International and PG&E Corp. slumped after the California Public Utilities Commission gave the energy companies support for a temporary 10 percent rate increase, rather than the 30 percent and 26 percent, respectively, they had asked for.
PG&E lost $2.56 to $17, while Edison dropped $2.75 to $12.25. California's two biggest power companies had asked for the rate increases to help keep them out of bankruptcy.
Drug shares fell as investors sold some stocks that soared in 2000 and bought some of the computer-related shares that had plunged.
Eli Lilly & Co. fell $5.19 to $86.31 after Salomon Smith Barney Inc. analyst Christina Heuer said its sepsis drug Zovant was less effective than expected in reducing deaths.
Other drug shares declined, including Pfizer Inc., which dropped $2.56 to $43.56; Merck & Co., which lost $3.88 to $89.13; and Bristol-Myers Squibb Co., down $4.69 to $66.81.
The S&P Drugs Index surged 37 percent last year as investors sought companies whose profits would hold up in a slowing economy.
Efficient Networks, Turnstone Fall
Efficient Networks Inc. and Turnstone Systems Inc. declined after the companies said sales in the last three months of 2000 fell short of analysts' forecasts.
Efficient Networks, which makes modems for high-speed Internet connections, tumbled $2.78 to $9.53, and Turnstone, a maker of equipment to install and monitor digital subscriber line services remotely, dropped 63 cents to $5.94.
The companies join more than a dozen makers of computer- networking and telephone equipment -- including Foundry Networks Inc., Adaptive Broadband Corp. and Network Engines Inc. -- that have said results will disappoint investors.
Tumbleweed Communications Corp. plunged $6.75 to $3.25 after the software maker lowered its revenue outlook for the fourth quarter and 2001 because customers are delaying purchases. The company, which makes software that manages e-mail systems, also said it would cut its workforce by 20 percent.
Oil Stocks Fall
Oil stocks fell after Prudential Securities Inc. analyst Michael Mayer said the recent rally in oil shares lifted the stocks close to his price forecasts. The shares now reflect the outlook for crude prices, he said.
Exxon Mobil Corp. fell $3.88 to $85.25, Amerada Hess Corp. lost $3.94 to $70, Sunoco Inc. lost 94 cents to $31.81 and Texaco Inc. declined $2.31 to $60.50.
The S&P International Oil Index had risen 8 percent from mid- December through yesterday, while the S&P 500 fell 2.2 percent. Mayer cut his rating on 13 oil producers and refiners to ``hold'' from ``accumulate'' or ``strong buy.''
Office Depot Inc. advanced 81 cents to $7.13. The No. 1 office-equipment retailer said it will close 70 stores in North America and it will cut 10 percent of its sales force. The company also said 2000 profit will disappoint investors and that it will take a fourth-quarter charge of as much as $300 million before taxes.
Extremely late but for the archives.
Best Regards, J.T. |
