Posted at 11:50 a.m., Thursday, July 12, 2001
Microsoft generates rally
Advertiser news services
NEW YORK — Starved for good news, investors sent stocks soaring today on weak earnings reports that provided just enough hope that a business turnaround will come sooner rather than later. The Dow Jones industrials and Nasdaq composite each surged by triple digits.
The rally, sparked by an upbeat revenue forecast from Microsoft, allowed Wall Street to build on momentum from lackluster earnings reports from Yahoo! and Motorola that were still better than expected.
"The announcement from Microsoft is what investors have been looking for," said Brian Slater, who helps manage $500 million at Condor Capital Management in Martinsville, N.J. "If Microsoft is going well, it leads you to believe that Intel and PC makers may start to see improvement."
The Dow Jones industrial average soared 237.97 to 10,478.99, according to preliminary calculations.
Broader stock indicators also advanced. The Nasdaq composite index was up 103.70 at 2,075.74. The Standard & Poor's 500 index rose 27.96 to 1,208.14.
Microsoft led the rally, rising $5.10 to $71.60 after the software maker said its fiscal fourth-quarter revenue would come in above expectations. The stock has risen 64 percent this year, the best performance in the 30-member Dow Jones Industrial Average.
Yahoo and Motorola, which reported quarterly results slightly ahead of expectations, advanced despite indications that business might be weak in coming months. Yahoo was up $1.23 at $18.26 after saying late yesterday it expected third-quarter results to break even. Motorola, which lowered estimates for the next two quarters today, gained $2.48 to $18.15.
Investors also rewarded General Electric, sending it up $2.39 to $47. The conglomerate met expectations with second-quarter earnings that rose 15 percent on strong performances in its financial services and power systems divisions.
The enthusiasm spread to retailers, even those who reported disappointing monthly sales today. AnnTaylor Stores rose $1.38 to $32.78, despite a 12.3 percent decline in June sales at stores open at least a year. AnnTaylor also lowered its earnings projections for the second quarter.
There was one weak spot: pharmaceuticals, a sector that usually suffers when investors shift money into technology. Schering Plough was off 47 cents at $35.80, while Merck dropped $1.36 to $61.
Now that the Federal Reserve has cut interest rate cuts six times this year, investors increasingly are looking to corporate profitability and performance as the best indicator the weakened economy is reviving.
The market is especially interested in the technology sector, which has taken the biggest beating over the last year as Wall Street punished companies that failed to deliver profits or at least the potential.
The news from Yahoo and Motorola appeared to boost investors' confidence that the business environment is stabilizing.
But Wall Street always buys on the future, rather than immediate, performance. In this case investors are buying stocks they think will pay off in six to 12 months, so immediate results are less important than the view down the road.
Some market experts think that gamble may be premature.
"Companies are still saying there's no visibility about when things will improve," said Phil Dow, managing director of equity strategy at Dain Rauscher Wessels.
Also today, the Labor Department said new claims for state unemployment insurance jumped last week to the highest level in nine years. Analysts attributed some of the increase to temporary shutdowns in the auto industry that occur annually as assembly lines are retooled.
