Stocks rose today after chip titan Intel signaled the beleaguered personal computer industry may turn the corner, but memories of this year's false rallies kept investors cautious.
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"A lot of money has been burnt up and it is going to take time for investors to heal, to resave and redeploy," said Tom Sparico, managing director of equities at broker/dealer Bengal Partners. "It is going to take time for us to work our way back to the confidence levels that business investment will grow at a fast enough pace to add to earnings growth of something more than single digits."
Upbeat comments from Intel sparked a modest early-morning rally, but stocks started to weaken at mid-session. It was the third day in a row an early stocks rally fizzled. Investors remain skittish after a dismal second-quarter reporting season offered few hints that a profit recovery was in sight.
"I keep asking, 'Is this for real? Is there any chance six months from now we are going to see a better economy?' People I know say this is a phony rally and don't be sucked in," said Ned Collins, a trader at Daiwa Securities America.
"I have been negative for a while. I have been trying my best to switch my position and get a little more positive, but it sure is tough," he added. "I keep wondering where is the earnings turnaround going to come from?"
The Nasdaq Composite Index added 19 points, or 0.92 percent, to 2,087.38, after climbing more than 1.6 percent early in the session and then dipping into negative ground. The technology-dominated index pulled in its third straight day of gains and has risen six out of the last seven sessions.
The blue-chip Dow Jones industrial average gained 41.17 points, or 0.39 percent, to 10,551.18, after notching a 0.95 percent gain earlier. The broader Standard & Poor's 500 Index ended up 4.82 points, or 0.40 percent, at 1,220.75.
Advancing issues on the Big Board outnumbered decliners, 1,783 to 1,272. On the Nasdaq, 1,854 stocks rose and 1,777 fell. Roughly 1.2 billion shares changed hands on the New York Stock Exchange and about 1.7 billion on the Nasdaq, based on the latest available numbers.
Broader Markets Up on Tech News
Craig Barrett, president and chief executive of Intel, said the personal computer industry has bottomed out and demand for PCs should rebound in the second half of 2001. But he noted a full-blown rebound depends on the global economy's recovering.
Intel, one of the 30 stocks in the Dow average, rose $1.36 to $32.11. The world's No. 1 maker of chips for personal computers was the most active issue on the Nasdaq.
The Philadelphia Stock Exchange semiconductor index advanced 3.15 percent, reflecting gains in other computer chipmakers. The index continued its trek above its own 200-day average, which it first broke above on Wednesday after a bullish call from brokerage Merrill Lynch on chipmakers.
Personal-computer maker Dell Computer Corp. climbed $1.25 to $28.43, while computing sector giant International Business Machines Corp. , a Dow stock, advanced $1.74 to $108.80.
Microsoft Corp., a Dow component and Nasdaq heavyweight, gained 98 cents to $67.45. A federal appeals court rejected the software giant's request to re-examine part of its ruling in the landmark antitrust case against the firm and also declined to speed the case's passage back to a lower court, a move sought by the U.S. government.
Investors got a mixed bag of earnings reports. Computer Sciences Corp. rose $3.61 to $37.15 after the world's No. 3 computer services supplier said earnings fell but were in line with lowered forecasts.
But Global Crossing Ltd., which built a high-speed fiber-optic network, slumped $1.32 to $5.68 after posting a wider quarterly loss, slashing its revenue-growth outlook for the year, and planning to cut 2,000 jobs.
McLeodUSA Inc. lost 55 cents to $2.27 after the telephone and data services said its quarterly loss, before items, widened. The company also cut its revenue and cash-flow forecasts for 2001 and 2002.
PMC-Sierra Inc. jumped $3.53 to $36.87 after Standard & Poor's said it would add the communications chipmaker to the closely watched S&P 500 index.
Summer Rally Underway?
The recent market moves could be the summer rally much awaited by the market, Hyman said. But he added he was not looking for the indexes to match their stellar performance in the weeks after they hit a nadir in late March and early April.
"My concern still is third-quarter pre-announcement season," Hyman said, referring to the period straddling the end of each quarter when companies confess disappointing results.
Yet, investors took heart in government data showing an unexpected sharp decline in the weekly number of Americans filing for first-time unemployment benefits. U.S. jobless claims fell sharply for the third straight week last week.
But Wall Street treaded carefully ahead of Friday's all-important jobs data for July, waiting to see more evidence the sluggish economy was bottoming.
A report on Wednesday confirmed the manufacturing sector has contracted for a full year, the worst performance since the nation's last recession in 1990-1991. That started August on a cautious note, after U.S. companies reported the worst earnings declines in a decade in July — down more than 17 percent from a year ago.
The technology-rich Nasdaq Composite Index ended up 41.25 points, or 2.03 percent, at 2,068.38, off earlier session highs, the blue-chip Dow Jones industrial average slipped 12.80 points, or 0.12 percent, to 10,510.01. The broader Standard & Poor's 500 Index finished up 4.70 points, or 0.39 percent, at 1,215.93.
International Markets Rally on Chip Upgrade
Outside the United States, Japanese stocks soared to their highest close in three weeks, propelled by computer chipmakers following the surge in their U.S. peers in the wake of the Merrill upgrade. Toshiba, Japan's top chipmaker, jumped 7.86 percent in heavy trade, pulling the tech-sensitive Nikkei up 3.68 percent or 439.87 points to 12,399.20.
Merrill, noting the worst may be over for the chip companies, had raised its opinion on the global semiconductor sector and upgraded its recommendations on 12 stocks. Industry fundamentals suggest global demand had hit a trough and supply was stabilizing after strong growth, the brokerage said.
European stock markets were strong by midsession, with telecom equipment makers Alcatel and Nokia pushing the tech sector towards its sixth straight winning session, while lackluster results from Royal Dutch/Shell dented energy shares.
Bank of England Cuts Interest Rates
The Bank of England surprised the market by cutting its key official interest rate by 25 basis points to 5 percent, saying world activity was slower than expected with the outlook also weaker than previously projected. The European Central Bank, however, stayed pat on rates.