Posted on: Friday, December 21, 2001
Tech bargains offset economic doubt
By Lisa Singhania
Associated Press
NEW YORK — Bargain hunting in technology lifted the stock market moderately higher today, despite more mixed economic news and a revenue warning from Nortel.
Analysts said the less-than-dismal consumer spending and sentiment data gave investors hope that a turnaround would begin in early 2002.
"Wall Street can't wait for people to grab it by the lapels and say, 'Buy now,"' said Larry Wachtel, market analyst at Prudential Securities. "People are betting a recovery will come quicker than we've thought. This is anticipatory buying."
The Dow Jones industrial average finished up 50.16, or 0.5 percent, at 10,035.34, according to preliminary calculations.
Broader stock indicators also advanced. The Standard & Poor's 500 index gained 4.97, or 0.4 percent, to 1,144.90, while the technology-focused Nasdaq composite index gained 27.27, or 1.4 percent, at 1,945.81.
For the week, the Dow gained 2.2 percent, the Nasdaq fell 0.4 percent and the S&P gained 1.9 percent.
The Commerce Department reported today that consumers reduced their spending in November by 0.7 percent, a weak, but slightly better-than-expected performance. Incomes fell for the third straight month as the nation's unemployment rate climbed to a six-year high.
Still, after a week of earnings and revenue warnings and tech selloffs, the market welcomed the news. Wall Street was also pleased with a Dow Jones News report that the University of Michigan December consumer sentiment index had moved higher again, another indicator of strength.
"People are interpreting this economic data as meaning that the economy and business are bouncing along the bottom," said Christopher Wolfe, equity market strategist for J.P. Morgan Private Bank. "So people are looking at higher risk stocks again."
In trading today, investors flocked to shares of tech companies, including Juniper Networks, that they had spurned earlier this week. Juniper rose $1.13 to $19.98, rebounding from losses triggered by an earnings warning yesterday and general profit-taking.
Nortel rose 77 cents to $7.13, after lowering its fourth-quarter revenue estimates but saying its loss would be narrower than expected.
Wall Street was less forgiving of financial shares. J.P. Morgan Chase dropped 77 cents to $35.75 on continuing worries about its $2.6 billion exposure stemming from the collapse of Enron. The figure is more than double what it previously disclosed — including nearly $1 billion it says it is owed by insurance companies.
The gains reversed a brief slide that started earlier this week when investors began collecting profits from the market's latest advance. Since Sept. 21, the day the market set its lows for the year, tech stocks have enjoyed a particularly strong rally with some stock price valuations reaching their highest levels in months. Despite a plethora of earnings and profit warnings, the sector continues to attract buyers on the belief it will be one of the first to recover in a turnaround.
Still, Wall Street is proceeding cautiously. Since rebounding from its post-terror attacks lows, stocks have traded in a narrow range — the Dow around 10,000, the Nasdaq at about 2,000. Analysts say that although sentiment is improving, many investors remain skittish about leaving money long-term in the market. Individual investors, who have watched their personal accounts implode in the last 18 months, are especially reluctant.
Advancing issues led decliners nearly 2 to 1 on the New York Stock Exchange. Volume came to 1.29 billion shares, compared with 1.09 billion shares at the same point yesterday.
