Investors Optimistic Ahead of Bellwether's Report

Stocks rose, resuming a late-spring rally, as the market's vacillating view of corporate earnings swung back to positive with upbeat talk from National Semiconductor.

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Meanwhile, much of the market's attention was focused on Intel and the company's business update, expected after the market close.

The Nasdaq composite index climbed 46.12 points, or 2.08 percent, to 2,263.85, according to the latest data. The Dow Jones industrial average added 20.43 points, or 0.18 percent, to 11,090.67. The benchmark Standard & Poor's 500 index rose 6.92 points, or 0.54 percent, to 1,276.95.

"Even though the earnings that are going to come out in this next quarter are pretty weak, there's a sense that maybe tech land is bottoming out," said Michelle Clayman, chief investment officer at New Amsterdam Partners.

Semiconductor stocks led the charge higher after a trade group, the Semiconductor Industry Association, said the industry will rebound in the second half of this year, grow 20 percent in 2002 and 25 percent in 2003. The Philadelphia Stock Exchange's Semiconductor Index rose 7.68 percent to a high unseen since May 21.

Stocks to Watch

National Semi reported a loss on lower sales, but the chipmaker said there may be signs of recovery on the horizon, as the company contends with an industry-wide inventory glut. The shares rose $3.07 to $31.04.

Intel is expected to give its interim update after the market closes on Thursday, and traders are looking to the leading semiconductor maker to help give clues to the fate of earnings in the high-tech sector. Intel was up $1.34 at $31.16.

Much of the Dow's earlier stuggle came from Philip Morris, which fell $1.62 to $48.38. A Superior Court jury in Los Angeles ruled Wednesday the company must pay $3 billion to a cancer-stricken smoker, the largest judgment against a cigarette maker in a lawsuit brought by an individual.

But what investors are most focused on are earnings, bracing themselves for the upcoming second-quarter results that will be quite weak, Johnson said. Adding to investor wariness is the increasing belief that third-quarter results will be even worse and the uncertainty over whether business will improve by the end of the year.

"The market is looking for some sign that the profits recession is going to end — some light at the end of the tunnel," Johnson said. "Nothing else matters."

Slumping profits dragged down the banking sector. J.P. Morgan Chase, a Dow stock, fell $1.89 to $44.95 after acknowledging in a filing Wednesday with the Securities and Exchange Committee that the second quarter has remained weak, particularly for its investment banking business.

Retailing stocks were mixed after reporting soft sales. Gap slipped 28 cents to $31.11 after the clothing company reported May sales fell 10 percent over last year, and warned that second-quarter sales will be weaker than previously expected.

But discounters including Wal-Mart, up 29 cents at $51.04, fared better. Wal-Mart said May sales were at the low end of its range of 3 to 5 percent gains, and warned in that unseasonably cool weather could hurt second-quarter profit margins.

Wall Street was also waiting on Intel, which was scheduled to provided its first-ever midquarter financial update after the end of the regular session. Intel, a high-tech bellwether and Dow component, was up $1.28 at $31.10.

The latest reminder of how the economy has slowed came from the Labor Department, which reported new claims for state unemployment insurance shot up last week to a nine-year high, an indication that employers' need for workers is still waning.

Declining issues narrowly outnumbered advancers 8 to 7 on the New York Stock Exchange where volume was 691.88 million shares, compared with 688.70 million at the same point Wednesday.

Wednesday’s Highlights

Stocks slid Wednesday after J.P.Morgan Chase and Hewlett-Packard became the latest blue-chip giants to warn the slumping economy is hurting revenues.

Financial services heavyweight J.P. Morgan Chase said it expects lower trading revenues in the quarters ahead, while leading computer maker H-P warned the slowdown in information technology was becoming global, eroding some hopes for a smooth recovery in the tech industry.

The Dow Jones industrial average fell 105.60 points, or 0.94 percent, to 11,070.24, dragged down by financial services and tech shares. The declines in the shares of H-P and J.P. Morgan Chase contributed 19 points, or about 20 percent, to the Dow's drop.

The broader Standard & Poor's 500 Index lost 13.54 points, or 1.05 percent, to 1,270.03, as declines in oil stocks weighed on the benchmark index.