Bulls thunder past key index barriers

Advertiser News Services

Investors who doubted the market's recovery might be having second thoughts after two key thousand-point barriers caved yesterday, as the Dow broke 10,000 and the Nasdaq steamrolled 2,000.

Good feelings spread beyond tech. The Dow Jones industrial average rose 220.45 points to 10,114.29, its first stop above 10,000 since Sept. 5.

Meanwhile, the Standard & Poor's 500 became the last major U.S. index to do what many analysts say signals the end of a bear market and start of a new bull: rise 20 percent or more off its low.

Now, even the skeptics are afraid to be left behind.

"This huge move has been driven by fear of missing the advance, rather than fundamentals," says Erik Gustaf-son, portfolio manager at Stein Roe Farnham.

Behind the rally:

• Economic news suggested that business is improving. Especially uplifting was a report that the services sector has begun to grow again, says Todd Clark, a trader at WR Hambrecht. "This got people enthused," he says.

• Dual bright spots hinted that the beleaguered technology industry might finally be reviving.

Oracle Chief Executive Officer Larry Ellison said the software company's growth and rich profit margins would return next year. News that prices for computer memory may be rising was even more encouraging, because the sector is one of the first to benefit from an economic recovery, says Scott Pape, portfolio manager at CastleArk Management. Analysts also expect Intel to issue positive midquarter guidance today.

Now, once-pessimistic investors are rushing to buy stocks or unwind their bearish bets. "This is the kind of thing that turns the bears on their heads," says Ed Wedbush, president of Wedbush Morgan Securities.

Bulls insist that the spate of positive news means analysts have been too glum about the future. For the first time since the economy stumbled early this year, analysts who have been cutting their estimates might actually be looking for positive surprises, Pape says.

But some still worry that investors might be getting too excited too soon. For one thing, much of the recent positive news from retailers is because of artificial demand whipped up by "0 percent financing offers," says Jim Paulsen, strategist at Wells Capital Management.

Also, many stocks — especially techs — have risen at rates that can't be sustained for long.

Meanwhile, investors still have to endure fourth-quarter earnings reports that won't be sunny, Paulsen says. "Investors are in a mode where any good news is evidence of a recovery," he says.

Technology has made the biggest strides since the Sept. 11 attacks. The Nasdaq has risen nearly 44 percent from its post-attack low of 1,423.19 on Sept. 21. The Dow has moved up almost 23 percent from its low; the S&P, up 21 percent.

But analysts were still cautious.

"The 10,000 number is a nice round number, but I don't think there is any magic to it," said Charles Blood Jr., senior financial markets analyst at Brown Brothers Harriman & Co.

Analysts also warned that the market might not be able to sustain its run. In the near term, they said, investors will feel compelled to take some profits, particularly when economic data disappoints them.

Positive forecasts from Cisco and Oracle made those companies the most heavily traded Nasdaq issues yesterday.

Networking company Cisco rose $1.02 to $21.54 following encouraging news from Chief Executive John Chambers, who told analysts Tuesday that November orders met expectations and that he feels the bulk of the business downturn is over.

Advancing issues outnumbered decliners about 2 to 1 on the New York Stock Exchange. Volume came to 1.73 billion shares, well above the 1.30 billion traded Tuesday.