Tech gains fuel broad rally
By Allen Wan
CBS MarketWatch
Wednesday November 20, 12:15 pm ET
NEW YORK (CBS.MW) - The Nasdaq surged Wednesday on recovery hopes for the key chip sector, while the Dow reversed earlier losses on positive reaction to data showing that the red-hot housing market may be cooling.
By early afternoon trade, the Dow had gained 1 percent, while the Nasdaq surged 2.2 percent. The Nasdaq 100 (NasdaqSC:^NDX - News) surged 3.1 percent.
In the only economic highlight of the day, the Commerce Department released data showing that construction of new homes plunged about 11 percent in October to an annual pace of 1.60 million from a 16-year high of 1.81 million in September. Read full report.
The percentage drop was the largest in nearly nine years. Economists were looking for a much smaller decline to around 1.71 million in October.
Sam Stovall, senior investment strategist at Standard and Poor's, said improved consumer confidence was overriding concerns about the housing market, which suggests investors realize that home building must eventually slow down.
Semiconductors, networking and Internet stocks were leading the rally in the tech sector, though computer software and hardware weren't that far behind. Read Hardware report.
Chip stocks rallied on recovery hopes in the equipment sector. Intel (NasdaqNM:INTC - News) gained 3 percent, while Advanced Micro Devices (NYSE:AMD - News) rose 1.3 percent.
By the numbers
The Dow Jones Industrial Average (CBOT:^DJI - News) rose 85 points, to 8,560. The Nasdaq Composite (NasdaqSC:^IXIC - News) gained 29 points to 1,404.
The Standard & Poor's 500 Index (CBOE:^SPX - News) rose 1.2 percent while the Russell 2000 Index (CBOE:^RUT - News) of small-capitalization stocks rose 1.4 percent.Winners topped losers by 17 to 11 on the NYSE and by 17 to 10 on the Nasdaq.
Networkers (CBOE:^GIP - News) were among the early sectoral leaders, inspired by gains for Cisco (NasdaqNM:CSCO - News) , which jumped 3.4 percent in most-active trade on the Nasdaq.Fiber-optics firm Corning (NYSE:GLW - News) soared another 6.3 percent, while in the related telecom sector, Qwest (NYSE:Q - News) jumped 17 percent on an ambitious plan to swap nearly $13 billion in debt for bonds with longer maturities in an effort to stave off a financial crisis.
In the software space, Siebel (NasdaqNM:SEBL - News) pared losses and was down only 1.3 percent after it denied allegations of accounting irregularities made by a pension fund. Microsoft (NasdaqNM:MSFT - News) rose 1.7 percent. Read Silicon stocks.
Pumatech (NasdaqNM:PUMA - News) , which makes synchronization software, catapulted 83 percent on news that Microsoft's MSN Internet service will use Pumatech's technology to synchronize MSN calendar and address book features. Read Net stocks.
Helping to fuel the Dow's rally was J.P. Morgan Chase (NYSE:JPM - News) , which rose 5.7 percent on relief that the nation's second largest bank had no credit liability in the National Century Financial Enterprises bankruptcy. Citigroup (NYSE:C - News) jumped 2.4 percent. Read MarketPulse
Another bullish sector was biotech (AMEX:^BTK - News) , which climbed on the back of 5 percent gains for Biogen (NasdaqNM:BGEN - News) after Lehman Brothers upgraded its rating to an 'overweight' from an 'equal weight' and raised its target price on the stock to $50 from $35.
Losing sectors included pharmaceuticals and airlines, with action driven by assorted news.
In the drug sector, shares of Pfizer (NYSE:PFE - News) and Pharmacia (NYSE:PHA - News) tumbled after the European Commission asked for more information about Pfizer's proposed $60 billion acquisition of Pharmacia. Pfizer conceded the antitrust review process could delay the closing of its acquisition by about a month. Both stocks were down 1.6 percent. or
The benchmark for airlines (AMEX:^XAL - News) stumbled after Delta (NYSE:DAL - News) announced it was launching a low-cost carrier to go wing-to-wing against the discount airlines. Delta shares fell 4.3 percent, while UAL (NYSE:UAL - News) tumbled 7.5 percent. and
The retailers were slightly higher, though not for all. Home Depot (NYSE:HD - News) lost another 3.9 percent, while Wal-Mart (NYSE:WMT - News) rose 1.6 percent.
Cooling housing starts
"There is little doubt that the fundamentals for the housing sector are extremely favorable: mortgage rates are at their lowest level in almost 40 years, demographics are positive (resulting in part from high levels of immigration), and people have a newfound appreciation for the wisdom of investing in real estate in the wake of the stock market plunge," said Kevin Cummins, economist at RBS Greenwich Capital.
"As a result, interest in the housing sector should stay firm, but with little pent-up demand, the contribution to GDP growth over the near-term is likely to be minimal, at best."
U.S. Treasury notes and bonds found modest gains with the help of the weaker-than-expected housing data. Checking prices in early action, a benchmark 10-year Treasury note was up 8/32 at 100 14/32 to yield (CBOE:^TNX - News) 3.95 percent, down from 3.98 percent in the previous session. A 30-year bond was 7/32 higher at 108 8/32, its yield (CBOE:^TYX - News) stood at 4.84 percent down from 4.85 percent. Read Bond report.
The dollar extended its recent strength and reached an intraday high of about 99.87 cents versus the euro, the first trade below parity since Nov. 7. Versus the Japanese yen, it reached its highest level -- 122.77 -- since Nov. 1. Read market pulse.
Stock trading volumes remained light ahead of the Thanksgiving holiday and with few market-moving stories beyond Iraq and terrorism. Volumes hit 246 million on the NYSE and 337 million on the Nasdaq.
Iraq and terrorism
Iraq and terrorism, along with EU enlargement, will top NATO's summit meeting in Prague. President Bush, who is attending the meeting, called allies to stand together in a strong "coalition of the willing" against Iraqi leader Saddam Hussein so that war might be averted. Read CBS News report. In a bid to combat terrorism, the Senate approved the creation of a massive, Cabinet-level Department of Homeland Security in a decisive 90-9 vote.
In Thom Calandra's StockWatch column , Thom speaks with one stock market professional who is playing up the importance of terrorism on the market.
H-P eases ahead of earnings report
Hewlett Packard also reversed gears despite seeing its 2003 estimates cut by Thomas Weisel. Ahead of its fourth-quarter earnings report after the bell, H-P gained 0.2 percent.
Wall Street expects a profit of 22 cents a share on sales of $17.3 billion for the printer and PC giant. The firm pocketed 8 cents a share on almost $18.2 billion in sales in last year's comparable quarter. Check out earnings calendar
H-P's rivals Dell (NasdaqNM:DELL - News) and IBM (NYSE:IBM - News) were up 1.6 and 1.8 percent, respectively.
Among blue-chips, General Electric (NYSE:GE - News) rose 2.1 percent ahead of an analyst meeting on Thursday when it is expected to report a charge of up to $2 billion according to analysts.
In overseas markets, a rebound for bank shares helped lead markets higher in Tokyo. European bourses fell on losses for financial and oil stocks. The euro slid back to parity with the dollar overnight, and was last at $1.008 as concerns over the direction of Germany once again took center stage. Check out Global Markets page.
In the energy sector, El Paso (NYSE:EP - News) dipped 3.4 percent after the New York Times reported that the energy firm - in order to avoid a restatement of its first-quarter earnings -- entered into a questionable power trade in August with Morgan Stanley. Read New York Times report.
Vivendi (NYSE:V - News) edged up 0.3 percent after it said that the Securities and Exchange Commission's probe into the French media company has become a formal investigation. |
