Posted at 12:45 p.m., Tuesday, June 5, 2001
Nasdaq, Dow rise as tech profit forecasts ease worries
Associated Press
NEW YORK — Technology stocks soared today after two high-profile tech firms reaffirmed their earnings forecasts, easing some of Wall Street's worries about upcoming second-quarter reports.
The momentum sent the Nasdaq composite index up nearly 3.6 percent and prompted a rally in blue chips. Analysts said many investors were jumping into the market out of fear they'd miss the next big advance.
"We're starting to see more confidence-building that there will be a recovery, particularly in technology," said Matt Brown, head of equity management at Wilmington Trust. "Certainly there are bumps ahead, and the market won't go straight up, but people are feeling like the Federal Reserve's interest rate cuts and the tax cuts will eventually work."
The technology-focused Nasdaq closed up 77.73 at 2,223.66, according to preliminary calculations.
The Dow Jones industrial average, meanwhile, rose 114.32 to 11,175.84, a 1.0 percent gain, while the broader Standard & Poor's Index gained 16.46, or 1.3 percent, to 1,283.57.
It was the fourth straight session that all three major indexes advanced. But today's trading, unlike the quiet sessions that preceded it, came on intense buying that followed earnings updates from Lucent Technologies and chip maker Xilinx.
Lucent gained 52 cents to $8.52 after the embattled company reaffirmed its third-quarter earnings projections. Chip maker Xilinx rose $4.37 to $45.96 on news it still expects to report quarterly losses, but in the range previously forecast.
With another earnings cycle approaching, Wall Street has been dogged by fears of weaker- than-expected results. A reduced earnings forecast from Sun Microsystems last week sent stocks tumbling. Today's announcements allayed some concerns.
"That news is eliminating some of the fears that we're going to have an earnings-warning parade like we did last quarter," said Todd Clark, co-head of trading at W.R. Hambrecht. "The bleeding may have stopped."
The rest of the market advanced more moderately. ExxonMobil rose 72 cents to $91.55 as part of a broader sector move on reports that OPEC had agreed to leave its official oil output unchanged, and would meet again in July.
Steel stocks rose on President Bush's decision to initiate a trade case that could impose sharp restrictions on steel imports. USX was up $1.70 at $21.74.
The market has been moving forward since Thursday, recovering some ground lost in an expected pullback from the huge spring rally. Some of that decline was attributable to fears about second-quarter earnings.
But analysts say doubts remain about the economy's direction and whether corporate profits will improve by the fourth quarter, as many investors hope.
Economic data in recent weeks has created a mixed impression of the nation's business climate.
The latest example came today, when the Labor Department revised downward its estimate of workers' productivity for the first three months of 2001. The government now says productivity fell 1.2 percent. a significant adjustment from its previous estimate of 0.1 percent.
The decline was the largest since the first quarter of 1993, when productivity fell at a rate of 5 percent.
Still, most analysts remain bullish on the market's longer-term prospects, largely because the Fed's five interest rate cuts so far this year are expected to stimulate business activity. They also expect the recently passed tax cut to help boost consumer spending.
"We have been looking for some sign in the tech sector that the erosion was over, and the fact that the market has held pretty steady is encouraging," said Bill Barker, investment strategy consultant at Dain Rauscher.
