Posted at 12:18 p.m., Monday, February 3, 2003
Stocks inch upward after earnings news
By Amy Baldwin
The advance, also supported by better-than-expected earnings and economic news, was unsurprising after the market's three straight losing weeks and big drop for the month of January.
Still, analysts were doubtful that any gains would be long lasting given investors' ongoing fears that a war with Iraq would further hurt the frail economy. In a sign of investors' caution, trading volume was extremely light and stocks were unable to hang on to their biggest gains today.
"(The market) is not up in a convincing way. There is very little enthusiasm for buying equities at the moment ... The prospect of war still looms large in many people's thinking," said Alan Ackerman, executive vice president at Fahnestock & Co.
The Dow Jones industrial average closed up 56.01, or 0.7 percent, at 8,109.82, after climbing as much as 98.27 in earlier trading. The Dow lost 1 percent last week, its third straight losing week. Today, the blue chips added to Friday's gain of 108.68, their biggest advance in four weeks.
The broader market was also higher, having suffered three consecutive weekly declines as well. The Nasdaq composite index rose 2.88, or 0.2 percent, to 1,323.79. The Standard & Poor's 500 index advanced 4.62, or 0.5 percent, to 860.32.
Economic news that exceeded Wall Street's expectations contributed to the market's gains. The Commerce Department reported construction spending jumped by 1.2 percent in December. The increase was larger than the 0.3 percent increase that analysts were predicting and marked the biggest gain in 10 months.
And the Institute of Supply Management said U.S. manufacturing activity grew for the third straight month in January, although the pace slowed. The private industry group said its index manufacturing activity had a reading of 53.9, slipping from a revised 55.2 for December. A reading above 50 indicates expansion in activity, while a reading below 50 points to contraction.
But the market's gains were modest following the news, which analysts attributed to investors requiring more proof that the economy is on the mend.
"We have to see a pattern with these economic numbers. One day is not going to do it. Let's see what happens on the next round," said Stephen Carl, principal and head of equity trading at The Williams Capital Group.
Positive earnings news contributed to the market's upturn. However, with fourth-quarter earnings season nearly over, Wall Street was losing a potential catalyst for gains. With mixed earnings news and a potential war, analysts say investors see no reason to commit to stocks.
Mattel rose $1.03 to $21.03 on fourth-quarter earnings that were 4 cents a share higher than Wall Street expected.
Standard Pacific climbed 51 cents to $25.76 after beating earnings expectations by 16 cents a share.
Brokerage upgrades also provided some lift. Eli Lilly advanced $1.44 to $61.68 after Prudential Securities raised its recommendation on the drug maker to "buy" from "hold."
Abercrombie & Fitch rose 47 cents to $28.31 after Merrill Lynch raised its rating on the retailer to "buy" from "neutral."
Technology got a boost from upbeat comments from the Semiconductor Industry Association. The group's president, George Scalise, said in an interview with CNBC he expects growth of 7 percent to 10 percent in the industry this year due to greater pricing power.
Semiconductor equipment maker Applied Materials inched up 5 cents to $12.02.