Stocks Rally, Lift Dow Over 10,000
By Jed Seltzer
Monday May 13, 4:46 pm Eastern Time
NEW YORK (Reuters) - Stocks rallied on Monday, lifting the Dow Jones industrial average (CBOT:^DJI - News) over the 10,000 mark, as investors bet quarterly earnings reports of technology leaders like Applied Materials Inc. (NasdaqNM:AMAT - News) will point to a turnaround in the key computer chip sector.
"There is some feeling that the fundamentals have bottomed in these popular names that are leading the market," said Milton Ezrati, senior economist and strategist at Lord Abbett & Co., which oversees $45 billion. "The economy is recovering, and I think earnings are going to surprise on the high side. I think there is altogether too much pessimism out there."
Top chip-manufacturing equipment maker Applied Materials, scheduled to report its quarterly results after Tuesday's closing bell, rose more than 7 percent after Goldman Sachs raised its earnings estimates for the company. Other financial firms made bullish comments about the chip sector.
Investors are betting technology companies, including Dell Computer Corp. (NasdaqNM:DELL - News), this week will unveil quarterly earnings that top analysts' estimates. That could extend the big one-day rally sparked by upbeat earnings from Web gear giant Cisco Systems Inc. (NasdaqNM:CSCO - News) last Wednesday, traders said.
The blue-chip Dow tacked on a 169.74-point gain, or 1.71 percent, to 10,109.66, according to the latest available figures. The technology-loaded Nasdaq Composite Index (NasdaqSC:^IXIC - News) jumped 51.69 points, or 3.23 percent, to 1,652.54. The broader Standard & Poor's 500 Index (CBOE:^SPX - News) rose 19.57 points, or 1.85 percent, to 1,074.56.
Nearly 1.1 billion shares changed hands on the Big Board and more than 1.61 billion on Nasdaq in moderate trading. Winners outpaced losers, with about 5 stocks rising for every 3 that fell on the New York Stock Exchange and 3 to 2 on Nasdaq.
"We're pulling buyers in off the sidelines. They're not coming in willingly," said Brian Finnerty, senior vice president at Melhado, Flynn & Associates. "But at least we can pull them aside and say, 'Hey, take a look at this stock."'
Lands' End Inc. (NYSE:LE - News) soared $10.71 to $61.73 after Sears, Roebuck and Co. (NYSE:S - News), the No. 4 U.S. retailer, agreed to buy the catalog and Internet retailer for about $1.9 billion in a bid to revive its apparel business. Sears edged up 19 cents to $52.
US Airways Group (NYSE:U - News) plunged 62 cents, or 17 percent, to $2.98. The No. 6 U.S. carrier said it will consider a bankruptcy filing if it cannot reach agreement with employees, suppliers and lenders to cut costs.
Reliant Resources Inc. (NYSE:RRI - News) slumped $2.09 to $9.91. The independent power producer said deals intended solely to boost trading volumes accounted for one-fifth of its power trading last year, confirming investor suspicions about phantom trading in the energy sector.
After last week's volatility, analysts questioned the staying power of Monday's rally.
"There are only two things that are really going to get semiconductor and software stocks moving: two consecutive quarters of good earnings and a resurgence of capital spending," said Tim Heekin, trading director at Thomas Weisel Partners.
"Until you get those two things combined, I think there is still going to be a lot of volatility in those two groups."
Cisco last Wednesday lifted the Nasdaq to its largest one-day jump in more than a year -- up almost 8 percent. But sentiment swiftly deteriorated after investors locked in gains on Thursday and Friday -- knocking the stock market to a losing week.
Applied Materials scrambled $1.88 higher to $25.58. Several Wall Street analysts predicted rosy results from the company, citing a stronger-than-expected recovery in orders. Goldman Sachs increased its 2002 and 2003 earnings per share estimates for Applied Materials.
Other chip equipment makers followed Applied Materials higher. Novellus Systems Inc. (NasdaqNM:NVLS - News) rallied $3.10 to $49.40, while KLA-Tencor Corp. (NasdaqNM:KLAC - News) rose $3.07 to $57.47.
Intel Corp. (NasdaqNM:INTC - News), the world's largest maker of computer chips, rose $1.51 to $28.52 and helped lift the Dow. The Philadelphia Stock Exchange semiconductor index (Philadelphia:^SOXX - News) rallied 5.9 percent.
Technology companies such as software providers and computer makers were also swept up in the rally.
Software supplier Computer Associates International Inc. (NYSE:CA - News) rose 51 cents to $17.91. Dell Computer Corp. (NasdaqNM:DELL - News) added $1.48 to $25.36. Computer maker Hewlett-Packard Co. (NYSE:HPQ - News) climbed 72 cents to $19.98. All three are slated to release results this week.
Several tech companies like Cisco have been reining in expenses to help meet or beat earnings projections, but the market still is waiting for sales to rebound from lower demand, Michael Vogelzang, president of Boston Advisors, said.
"You're starting to see some earnings come in ahead of estimates because cost controls are so effective," Vogelzang said. "Now what the market is desperately in need of is a little demand here."
Qualcomm Inc. (NasdaqNM:QCOM - News) jumped $2.29 to $29.09. UBS Warburg raised its rating on the wireless technology firm to "buy" from "hold" due to gains in the South Korean market and increased likelihood of its technology being used in India.
Monday's rally pushed the market through major resistance levels, the point where sellers are likely to emerge. The next key resistance levels are at 1,657 to 1,660 for the Nasdaq, 10,137 to 10,140 for the Dow and 1,088 to 1,090 for the S&P, according to Holly Liss, chief technical strategist at Mizuho Securities USA Inc. The levels are key elements of technical analysis, which studies prices, volume and charts. |
