Tech rally propels U.S. stocks
By Julie Rannazzisi
Tuesday November 12, 12:47 pm ET
CBS MarketWatch
NEW YORK (CBS.MW) -- Stock gains widened in early afternoon dealings Tuesday on the back of a tech rally that saw Motorola, Hewlett-Packard and Oracle attract significant buyers.
In sector action, chip, networking and software stocks stole the show while broader market groups lagged behind. J.C. Penney's upbeat results sustained retail stocks, with paper, biotech and defense stocks also among the better performing sectors. Only utility, gold and oil service issues logged losses.
In the meantime, Fed Vice Chair Roger Ferguson said at a conference in Pittsburgh that the Fed still has firepower left should the economy need additional stimulus. His words addressed concerns that with the overnight rate at a rock bottom 1.25 percent, the central bank has little room to maneuver should a shock hit the economy.
Ferguson said it's likely that demand will remain modest for some time and added that one of the biggest risks to recovery is geopolitical uncertainty. He expressed optimism that the Fed's latest rate cut would stoke a recovery during the coming year and called the risk of deflation remote.
Ferguson's words come a day ahead of Fed Chief Alan Greenspan's speech on the U.S. economy before the Joint Economic Committee.
The Dow Jones Industrial Average (CBOT:^DJI - News) sprinted 103 points, or 1.2 percent, to 8,462, propped up by Intel, Hewlett-Packard, Alcoa, Caterpillar and Boeing. Downside action emerged in shares of Philip Morris, General Electric, SBC Communications and McDonald's.
Hewlett-Packard (NYSE:HPQ - News) -- which got creamed on Monday following the announcement of the departure of president Michael Capellas -- recently changed hands up 3.3 percent.
Investors also got some soothing words from two well-know market strategists.
Morgan Stanley's influential Barton Biggs told clients he still believes the "currently sulking equity market will rally further and last longer. Many argue that the Fed's rate cut is already a flop. However, long rates have fallen, credit spreads have narrowed and the dollar has softened, all of which are good omens for the economy."
Morgan Stanley strategist Byron Wien also said he continues to expect higher stock prices in 2003 as the economy improves after a weak fourth quarter. Economist Richard Berner increased his 2003 GDP forecast to 3.5 percent form 3.3 percent, with additional increases deemed "not surprising."
The Nasdaq Composite (NasdaqSC:^IXIC - News) swelled 33 points, or 2. percent, to 1,352 and the Nasdaq 100 Index (NasdaqSC:^NDX - News) rallied 33 points, or 3.5 percent, to 1,006.
The Standard & Poor's 500 Index (CBOE:^SPX - News) ascended 1.4 percent while the Russell 2000 Index (CBOE:^RUT - News) of small-capitalization stocks rose 1.6 percent.
Worries about a potential war will remain at the fore as Iraq's parliament unanimously recommended rejection of a U.N. resolution on weapons inspections Tuesday. Iraqi President Saddam Hussein will have final say, with Friday set as the deadline to respond to the resolution.
Volume came in at 567 million on the NYSE and at 713 million on the Nasdaq Stock Market. Winners raced past losers by 21 to 10 on the NYSE and by 19 to 11 on the Nasdaq.
Fund managers still have misgivings
While fund managers built on the prior month's optimism regarding the economy and earnings, Merrill Lynch's November fund manger survey revealed that they still have considerable misgivings about the nature of the recovery.
In fact three-quarters feel that cost cutting -- as opposed to top-line revenue growth -- will be the main driver of earnings growth over the next 12 months, the Merrill survey found.
Fund managers' projections for profit growth in the coming year rose to 7 percent from 6 percent and the latest survey showed that investors still see the market as undervalued and many still consider themselves overweight cash.
Oracle, Motorola, IBM on the rise
Oracle, knocked by a downgrade on Monday, was pushed 4.2 percent higher by investors on reassuring words from the company at a tech conference. The company (NasdaqNM:ORCL - News) said it's seeing the end of almost two years of revenue declines and projected a turnaround in the first half of 2003, with positive revenue growth in the second half, Reuters reported. The software giant also backed its fiscal second-quarter profit goal.
UBS Warburg said there were no significant developments at the Oracle meeting and reiterated its "hold" rating on the stock.
"What CFO Henley did say was that nothing has changed in his view since the earnings call in mid-September. He followed up this comment by saying that there is still a lot of business left to be done in the quarter. We take it to mean that the quarter is as backend loaded as a normal Oracle quarter," UBS told clients.
Among other software stocks, BEA Systems (NasdaqNM:BEAS - News) rallied 8.3 percent after SG Cowen upped its third-quarter profit estimates on the company in anticipation of a solid quarter. Cowen said recent checks indicated that its October quarter finished relatively well in a still tough IT environment. BEA will report its third-quarter results later in the week, with Thomson First Call projecting earnings of 6 cents a share.
Chip stocks were among the best performers, with Motorola (NYSE:MOT - News) up almost 5 percent following reassuring comments from the company at the UBS Warburg Global Telecom Conference.
"Motorola sees improved order trends in October vs. September. The company continues to see the semiconductor business as being flat to slightly up sequentially and good sequential growth in the handset business," UBS said in a note to clients.
IBM (NYSE:IBM - News) rose 1.1 percent ahead of its annual analyst meeting on Wednesday. Merrill Lynch believes Big Blue should indicate it's on track for the quarter.
"IBM was aggressive in endorsing double-digit sequential revenue growth in the fourth quarter -- but we think it's achievable," Merrill said. The brokerage maintained it "buy" rating on the stock with a price target of $88.
Dell (NasdaqNM:DELL - News) , which is set to report its third-quarter results on Thursday, climbed 2.1 percent in recent action. SG Cowen expects an "in line or slightly better" quarter but added that the industry outlook will likely remain cautious. Thomson First Call expects Dell to have made 21 cents a share in its third quarter.
Cisco Systems' (NasdaqNM:CSCO - News) 6.5 percent advance catapulted the networking sector (AMEX:^NWX - News) to significantly higher ground. CEO John Chambers said at the UBS Warburg Global Telecom Conference on Tuesday that he's "comfortable" with the current backlog and that he's not looking to lower the company's headcount.
J.C. Penney rallies; 3M up while Corning vaults
J.C. Penney (NYSE:JCP - News) swelled 9.2 percent after posting a fiscal third- quarter profit that surpassed expectations while also lifting its outlook for the fourth quarter and full year thanks to progress in the turnaround of its department store, catalog and pharmacy businesses.
Dow component 3M (NYSE:MMM - News) rose 1.9 percent after telling investors that it would snare Corning's (NYSE:GLW - News) Precision Lens subsidiary for $850 million in cash. The deal is expected to contribute 7 cents a share to 3M's 2003 earnings. Corning said it would use proceeds of the sale to repay debt and contribute to its pension plan. Its shares rallied over 19 percent on the news.
In the insurance sector, Chubb (NYSE:CB - News) climbed 3.4 percent following an upgrade from Lehman Bros. to an "equal weight" from an "underweight."
Read Movers & Shakers for the latest individual stock news.
Treasurys take off
Treasury issues rallied heartily, resuming last week's trend. Fixed-income markets were closed on Monday in observance of Veterans Day.
The 10-year Treasury note rallied 9/32 to yield (CBOE:^TNX - News) 3.805 percent while the 30-year government bond jumped 1/2 to yield (CBOE:^TYX - News) 4.76 percent.
No data is due out until Thursday, when the October retail sales report and the October import and export price indexes are unfurled.
In the currency sector, the dollar was little changed, erasing 0.1 percent to 119.55 yen while the euro rose 0.1 percent to $1.0106. |
