Wall Street Logs Biggest Rally in 7 Months
By Haitham Haddadin
Tuesday April 16, 4:52 pm Eastern Time
NEW YORK (Reuters) - Wall Street logged its biggest gain in nearly seven months on Tuesday as muted inflation data and upbeat financial forecasts from chip company Texas Instruments Inc. .(NYSE:TXN - news) and automaker General Motors Corp. (NYSE:GM - news) lit a fire under stocks.
``It's a beautiful world,'' said Ned Riley, chief investment strategist with State Street Global Advisors. ``People were extremely downbeat coming into earnings season, but ... tech earnings have been coming in better than expected and even the old-line companies, such as GM, have been better.``
This week and the next mark the busiest period for reporting first-quarter results. Scorecards from long-distance telephone company Sprint Corp. (NYSE:PCS - news; NYSE:FON - news) and Novellus Systems Inc. (NasdaqNM:NVLS - news), the chip equipment maker, helped fuel hefty gains in semiconductor stocks and an explosive rally in telecommunications shares.
Intel Corp. (NasdaqNM:INTC - news), the No. 1 computer chip maker, after the close Tuesday reported first-quarter earnings down slightly from a year ago, suggesting that its profit declines are nearing an end. The stock, which raced up $1.40 to $29.51 in regular trading, extended its gains to $30.70 after hours.
The Dow Jones industrial average (^DJI - news) surged 207.65 points, or 2.06 percent, to 10,301.32, according to the latest available data. The technology-laced Nasdaq Composite Index (^IXIC - news) jumped 63.01 points, or 3.59 percent, to 1,816.79. The broader Standard & Poor's 500 Index (^SPX - news) shot up 25.82 points, or 2.34 percent, to 1,128.37, its biggest percentage gain since late September.
Investors got a wide array of mostly upbeat economic news from government reports. Construction of U.S. homes fell last month, but the beleaguered factory sector had its best showing in two years. March retail inflation data, as measured by the Consumer Price Index, showed costs rose less than economists forecast.
``I felt the data was fabulous,'' said Phil Orlando, chief investment officer of Value Line's Asset Management division. ``There is no inflation in the economy so the Fed is absolutely not raising (interest) rates at the May or June meetings ... and that means the market can rally.'' Lower rates cut corporate borrowing costs and can ultimately boost companies' results.
The Fed lowered rates 11 times last year to boost the economy, but recent signs of growth have spurred Wall Street to wonder when the U.S. central bank will reverse course and raise the borrowing cost to head off any inflationary pressures.
GM, a proxy for economically sensitive companies, leaped $2.95 to $64.05. The world's largest automaker posted earnings, before one-time items, that shot off the charts on the back of strong gains from North American truck sales. GM also raised its U.S. sales outlook and its earnings estimates for the full year.
Texas Instruments rose $1.66 to $33.79. The world's No. 1 maker of semiconductors for mobile phones posted a slight loss that was within the range of analysts' forecasts. It said sales and profits this quarter would outpace expectations, as customers restock on microchips.
FleetBoston Financial Corp. (NYSE:FBF - news) rose $2.70, or 8 percent, to $36.18. The firm reported a higher profit and said it plans to sell its Robertson Stephens investment bank and stop investing in its troubled Latin American operation to focus on low-risk businesses like lending.
Telecommunications stocks rallied after Sprint posted better-than-expected first-quarter results and gave the depressed sector its first speck of positive news in months. Sprint PCS shares rose $2.58 to $12.60. Sprint Fon Group (NYSE:FON - news) stock jumped $2.79, or 20.7 percent, to $16.26.
``That increases the confidence that perhaps we've maybe seen a bottoming in the fundamentals, and therefore in the stocks,'' said Tim Ghriskey, a portfolio manager at Ghriskey Capital Partners LLC, referring to Sprint's numbers.
The North American Telecommunications Index (^XTC - news) soared more than 10 percent, far outpacing the broader S&P 500.
WorldCom Inc. (NasdaqNM:WCOM - news), Nasdaq's most active issue, jumped $1.16 to $6.23, or nearly 23 percent, while AirGate PCS Inc. (NasdaqNM:PCSA - news), which sells wireless service under the Sprint PCS brand name, surged $3.63, or 27 percent, to $16.99.
Dow stock General Electric Co. (NYSE:GE - news) climbed $1.25 to $33.10 and was the most active stock on the New York Stock Exchange. The company, dogged by disappointing results and doubts about future performance, rose after the conglomerate's chief executive Jeffrey Immelt told GE-owned business television news channel CNBC on Monday the firm's outlook was strong.
Shares of home builders fell after the downbeat housing data. Lennar Corp. (NYSE:LEN - news) was down 96 cents at $53.68 and Centex Corp. (NYSE:CTX - news) lost 49 cents at $52.38.
Novellus forecast hefty order growth for the second quarter, even as it recorded a first-quarter sales drop of 63 percent. Shares surged $3.06, 6 percent, to $53.46.
The Philadelphia semiconductor index (^SOXX - news) raked in a hefty gain of 5.6 percent.
Coca-Cola (NYSE:KO - news), boosted by strong sales in its key North American market, reported a profit before special items that beat the consensus forecast. That news sent shares of the Dow component up $1.49 to $53.88.
Dow issue Caterpillar Inc. (NYSE:CAT - news) lost $1.34 to $56.65 after the construction equipment maker said profits fell 50 percent because of weak demand for mining and other equipment.
Also on a downbeat note, Handspring Inc. (NasdaqNM:HAND - news) plunged 19 percent, or 72 cents, to $3. The handheld computer maker reported a quarterly loss as revenues fell by more than half.
Stocks blasted through resistance levels -- or points where sellers often emerge. For Nasdaq, getting through the 1,800 point level is significant, said Richard Dickson, a technical analyst at Hilliard Lyons in Louisville, Kentucky. A close above that level could help fuel a big rally, he said.
Support -- where buyers swoop in -- is at 1,120 for the S&P 500, 10,150 for the Dow and 1,770 for the Nasdaq, according to research firm Schaeffersresearch.com |
