Markets Finish Higher on Intel

N E W  Y O R K, Aug. 2, 2001 -- Stocks rose today after chip titan Intel signaled the beleagueredpersonal computer industry may turn the corner, but memories ofthis year's false rallies kept investors cautious.

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"A lot of money has been burnt up and it is going to taketime for investors to heal, to resave and redeploy," said TomSparico, managing director of equities at broker/dealer BengalPartners. "It is going to take time for us to work our way backto the confidence levels that business investment will grow ata fast enough pace to add to earnings growth of something morethan single digits."

Upbeat comments from Intel sparked a modest early-morningrally, but stocks started to weaken at mid-session. It was thethird day in a row an early stocks rally fizzled. Investorsremain skittish after a dismal second-quarter reporting seasonoffered few hints that a profit recovery was in sight.

"I keep asking, 'Is this for real? Is there any chance sixmonths from now we are going to see a better economy?' People Iknow say this is a phony rally and don't be sucked in," saidNed Collins, a trader at Daiwa Securities America.

"I have been negative for a while. I have been trying mybest to switch my position and get a little more positive, butit sure is tough," he added. "I keep wondering where is theearnings turnaround going to come from?"

The Nasdaq Composite Index added 19 points, or 0.92percent, to 2,087.38, after climbing more than 1.6 percentearly in the session and then dipping into negative ground. Thetechnology-dominated index pulled in its third straight day ofgains and has risen six out of the last seven sessions.

The blue-chip Dow Jones industrial average gained41.17 points, or 0.39 percent, to 10,551.18, after notching a0.95 percent gain earlier. The broader Standard & Poor's 500Index ended up 4.82 points, or 0.40 percent, at1,220.75.

Advancing issues on the Big Board outnumbered decliners,1,783 to 1,272. On the Nasdaq, 1,854 stocks rose and 1,777fell. Roughly 1.2 billion shares changed hands on the New YorkStock Exchange and about 1.7 billion on the Nasdaq, based onthe latest available numbers.

Broader Markets Up on Tech News

Craig Barrett, president and chief executive of Intel, saidthe personal computer industry has bottomed out and demand forPCs should rebound in the second half of 2001. But he noted afull-blown rebound depends on the global economy's recovering.

Intel, one of the 30 stocks in the Dow average, rose $1.36to $32.11. The world's No. 1 maker of chips for personalcomputers was the most active issue on the Nasdaq.

The Philadelphia Stock Exchange semiconductor indexadvanced 3.15 percent, reflecting gains in other computerchipmakers. The index continued its trek above its own 200-dayaverage, which it first broke above on Wednesday after abullish call from brokerage Merrill Lynch on chipmakers.

Personal-computer maker Dell Computer Corp.climbed $1.25 to $28.43, while computing sector giantInternational Business Machines Corp. , a Dow stock,advanced $1.74 to $108.80.

Microsoft Corp., a Dow component and Nasdaqheavyweight, gained 98 cents to $67.45. A federal appeals courtrejected the software giant's request to re-examine part of itsruling in the landmark antitrust case against the firm and alsodeclined to speed the case's passage back to a lower court, amove sought by the U.S. government.

Investors got a mixed bag of earnings reports. ComputerSciences Corp. rose $3.61 to $37.15 after the world'sNo. 3 computer services supplier said earnings fell but were inline with lowered forecasts.

But Global Crossing Ltd., which built a high-speedfiber-optic network, slumped $1.32 to $5.68 after posting awider quarterly loss, slashing its revenue-growth outlook forthe year, and planning to cut 2,000 jobs.

McLeodUSA Inc. lost 55 cents to $2.27 after thetelephone and data services said its quarterly loss, beforeitems, widened. The company also cut its revenue and cash-flowforecasts for 2001 and 2002.

PMC-Sierra Inc. jumped $3.53 to $36.87 afterStandard & Poor's said it would add the communicationschipmaker to the closely watched S&P 500 index.

Summer Rally Underway?

The recent market moves could be the summer rally muchawaited by the market, Hyman said. But he added he was notlooking for the indexes to match their stellar performance inthe weeks after they hit a nadir in late March and earlyApril.

"My concern still is third-quarter pre-announcementseason," Hyman said, referring to the period straddling the endof each quarter when companies confess disappointing results.

Yet, investors took heart in government data showing anunexpected sharp decline in the weekly number of Americansfiling for first-time unemployment benefits. U.S. joblessclaims fell sharply for the third straight week last week.

But Wall Street treaded carefully ahead of Friday'sall-important jobs data for July, waiting to see more evidencethe sluggish economy was bottoming.

Wednesday’s Action

A report on Wednesday confirmed the manufacturing sectorhas contracted for a full year, the worst performance since thenation's last recession in 1990-1991. That started August on acautious note, after U.S. companies reported the worst earningsdeclines in a decade in July — down more than 17 percent froma year ago.

The technology-rich Nasdaq Composite Index ended up41.25 points, or 2.03 percent, at 2,068.38, off earlier sessionhighs, the blue-chip Dow Jones industrial averageslipped 12.80 points, or 0.12 percent, to 10,510.01. Thebroader Standard & Poor's 500 Index finished up 4.70points, or 0.39 percent, at 1,215.93.

International Markets Rally on Chip Upgrade

Outside the United States, Japanese stocks soared to theirhighest close in three weeks, propelled by computer chipmakersfollowing the surge in their U.S. peers in the wake of theMerrill upgrade. Toshiba, Japan's top chipmaker, jumped7.86 percent in heavy trade, pulling the tech-sensitive Nikkeiup 3.68 percent or 439.87 points to 12,399.20.

Merrill, noting the worst may be over for the chipcompanies, had raised its opinion on the global semiconductorsector and upgraded its recommendations on 12 stocks. Industryfundamentals suggest global demand had hit a trough and supplywas stabilizing after strong growth, the brokerage said.

European stock markets were strong by midsession, withtelecom equipment makers Alcatel and Nokia pushing the techsector towards its sixth straight winning session, whilelackluster results from Royal Dutch/Shell dented energyshares.

Bank of England Cuts Interest Rates

The Bank of England surprised the market by cutting its keyofficial interest rate by 25 basis points to 5 percent, sayingworld activity was slower than expected with the outlook alsoweaker than previously projected. The European Central Bank,however, stayed pat on rates.

The Associated Press and Reuters contributed to this report-->