Postedat 1:05 p.m., Thursday, June 28, 2001
Interest rate cut, Microsoft help Dow rebound
Associated Press
NEW YORK — Stocks soared today while Wall Street cheered lower interest rates and a federal appeals court's reversal of the breakup of Microsoft.
The Dow Jones industrial average ended up 131.37 at 10,566.21, according to preliminary calculations, changing course after four straight sessions of declines that produced an aggregate loss of 268 points.
Broader stock indicators also moved higher. The Standard & Poor's 500 index rose 15.16 to 1,226.23, while the Nasdaq composite index advanced 50.91 to 2,125.65.
The court ruling on Microsoft, which came just before noon, reversed parts of a lower court finding that the software maker had violated antitrust laws. The stock, a Dow industrial, rose $1.57 to $72.71.
The news intensified a rally in technology and blue chips that began early in the session as investors decided the Federal Reserve's interest rate cut yesterday, though smaller than they wanted, was a reason to buy.
"Psychologically, this could help technology a little but it doesn't change underlying fundamentals. The outlook is still poor for most of the sector," said Rafael Tamargo, director of equity trust at Wilmington Trust.
Other high-tech gainers included Oracle, up $1.14 at $19.18, and PMC-Sierra, which gained $1.73 to end at $29.15.
Blue chips were also strong across a variety of sectors. Alcoa rose $1.54 to $40, American Express advanced $1.22 to $39.47 and Wal-Mart moved up 87 cents to $49.37.
The strong buying, though, was largely a delayed upbeat response to the Fed's sixth interest rate reduction this year. Yesterday, Wall Street was upset by the Fed's decision to cut rates a quarter of a percentage point, instead of the half-point many on Wall Street felt was in order.
But the market quickly got over its disappointment about the size of the cut as investors opted to pick up shares that have fallen to bargain prices in recent weeks. Analysts said the end of the quarter, and prospects for an economic recovery in the second half of the year, also contributed to the buying.
"The market seems to be used to the fact that these second-quarter earnings are going to be ugly. The market is going to be looking forward now," said Barry Berman, head trader for Robert W. Baird & Co. in Milwaukee.
Investors since late May have been skittish because of a streak of bad news — more than 600 profits warnings this quarter alone — and the lack of a timeline for when corporate performance will improve.
"We're still looking for a fourth-quarter recovery, but we won't have any visibility about the fourth quarter until late August," said Charles White, portfolio manager at Avatar Associates, who said Wall Street is looking for signs of a turnaround.
The market also got a lift from news that General Electric's proposed purchase of Honeywell might not be dead after all.
Honeywell rose $1.20 to $38.20 on reports GE had offered to sell a stake in one of its most prized units to win European Union antitrust clearance for its $41 billion purchase of Honeywell. GE and European regulators had previously indicated such approval was unlikely. GE rose 61 cents to $48.87. Both are Dow stocks.
And there was at least one sign that employment levels might be stabilizing. New claims for state unemployment insurance fell last week, the third sharp drop in a row, suggesting that the rash of layoffs seen so far this year may be moderating.
Advancing issues outnumbered decliners slightly more than 3 to 2 on the New York Stock Exchange. Volume came to 1.30 billion shares, ahead of the 1.14 billion shares reported yesterday.
Overseas, Japan's Nikkei stock average fell 1.2 percent.
