Posted at 1:20 p.m., Tuesday, July 31, 2001
Earnings reports spur rally
Associated Press
NEW YORK — Relieved investors sent stock prices sharply higher today as the last of companies' second-quarter earnings trickled in. But Wall Street was unable to hold its best gains of the day, an expected turn of events given the market's tenuous state of health.
A positive report on consumer spending contributed to the rally, while disappointing readings on consumer confidence and manufacturing appeared to have little effect on trading.
"It is the end of the bottoming-out phase. It is the next up leg of the next bull market," said Charles H. Blood Jr., senior financial markets analyst at Brown Brothers Harriman & Co.
Others noted that a rally was to be expected, with companies just about finished issuing their reports, which have been largely disappointing and often accompanied by warnings. But rallies will be vulnerable until the economy shows signs of recovery.
"I'll give it the benefit of the doubt for right now," said Todd Clark, co-head of trading at WR Hambrecht.
The Dow finished up 121.09 at 10,522.81, according to preliminary calculations, after rising as much as 191 points.
Broader indicators also moved higher. The Nasdaq composite index advanced 9.29 to 2,027.13, but like the Dow, it fell back from an earlier 39-point rise.
The Standard & Poor's 500 index picked up 6.71, rising to 1,211.23.
Wall Street was heartened by the government's report that consumer spending — which accounts for two-third's of the nation's economy — rose 0.4 percent, and income increased 0.3 percent in June.
Analysts were more encouraged that the market advanced despite two disappointing reports. The New York-based Conference Board said its Consumer Confidence Index skidded in July for the first time since April, reflecting ongoing worries about jobs and the future.
The Purchasing Management Association of Chicago index of area business activity fell sharply in July. The Chicago survey is watched closely for clues to the index of the National Association of Purchasing Management, which will release July results tomorrow.
"When the market reacts well in the face of negative news, that is reason to pay attention. ... It's got me thinking that maybe this is something to believe," Clark said.
But he also said there was reason to question the surge, which could be related to the end of second-quarter earnings reports.
The advance was spread across an array of sectors, and many gains were substantial, signs that investors simply were in the mood to buy. 3M climbed $2.63 to $111.88, Merck rose $1.73 to $67.98 and Intel advanced 77 cents to $29.81. All three are Dow industrials.
Losers included companies that reduced their outlooks for the future. Verizon, which met earnings expectations, fell $1.87 to $54.69 after reducing its outlook for the year.
World Wrestling Federation Entertainment, which offered fiscal 2002 revenue growth targets that suggest weak first-quarter growth, tumbled $2.39 to $10.50.
Advancing issues outnumbered decliners slightly more than 3 to 2 on the New York Stock Exchange. Volume came to 1.13 billion shares, ahead of the 902.95 million traded yesterday.
