Stocks Rally Ahead of Key Reports, Greenspan

N E W  Y O R K, July 17, 2001 -- Stocks jumped today onone of the busiest days of the earnings-reporting season, asinvestors looked past mixed quarterly results and held out hopefor improving growth for Corporate America.

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Wall Street's mood got a boost from some companies whosedeteriorating results still managed to meet or beat analysts'estimates, including Dow component Caterpillar.

"There is just that continued battle between overallpositive monetary and fiscal policy and individual companies'earnings disappointments," said Rick Meckler, senior managingdirector at Liberty View, with oversees $1 billion.

"The underlying government policy is positive, and[investors] are assuming, given enough time, it will work,"Meckler added.

The Dow Jones industrial average climbed 134.27points, or 1.28 percent, to 10,606.39, according to the latestdata, putting it at the highest finish in nearly a month, whilethe Nasdaq composite index climbed 38.22 points, or1.88 percent, to 2,067.34. The benchmark Standard & Poor's 500 added 11.99 points, or 1.00 percent, at 1,214.44.

Stocks to Watch

Caterpillar, the multinational maker of constructionequipment, accounted for 16 percent of the Dow's gain as thestock jumped 3.2 percent, or $3.18, to $53.55. The company saidearnings slid 14 percent, but still beat estimates.

Photography giant Eastman Kodak Co. , also one of the30 corporate icons that make up the Dow average, metexpectations by reporting a 36.6 percent drop in profits,reflecting weaker sales of cameras and film. Its shares rose$1.33 to $46.03.

Latest earnings reports

Amid the rush of blue-chip earnings reports, investors werebracing for results from computer chip giant Intel, expected after the closing bell. Intel was up 77cents at $29.90, helping lift the Nasdaq into positiveterritory after a shaky morning.

Among those spreading optimism was Maytag Corp. ,the No. 3 U.S. home appliance maker. It posted a 66-percentdrop in earnings before the effect of an accounting change assales of vacuum cleaners and floor care products slumped, butalso said third-quarter earnings to be similar to first-quarterearnings. Its shares climbed 54 cents to $31.75.

Whirlpool Corp. , the No. 1 U.S. maker of homeappliances, also rose, shrugging off a 22 percent drop inearnings caused by soft spending on major appliances around theglobe after it said it expected strong improvement in the thirdand fourth quarters. Its stock rose $2.30 to $70.39.

Even chip maker Novellus Systems, whichposted a 24 percent drop in income, managed to shake off itsgrim results. The company's chief executive said there is"significant uncertainty" in the semiconductor industry amidweak demand for computers and telecommunications gear. Itsshares rose anyway, climbing $21.99 to $48.36.

"A lot of the damage is already reflected in stock prices,"said Alfred Kugel, senior investment strategist at Stein Roe &Farnham, which is part of the $70 billion Liberty Funds Group.

General Motors , a Dow component, posted a 74 percentdrop in earnings to $477 million as lower U.S. vehicle salesand losses from overseas operations took their toll on theworld's largest automaker. GM seesawed the unchanged mark andfell 20 cents to $66.84.

Pharmaceuticals giant Johnson & Johnson , anotherDow stock, climbed 98 cents to $54.71 after taking a beating inearly trading. The company's profits rose, but it missed Streetforecasts.

Warning Call

Despite investors' apparent optimism over the earnings sofar, some analysts say there may not yet be enough evidence ofa pickup yet to get too optimistic about a rebound in stocks.

Companies in the S&P 500 are expected to post an averagedrop in profits of 18 percent for the second quarter, withabout 20 percent of them having now reported their results,according to Thomson Financial/First Call.

"We always beat the estimates. The critical question is dowe beat them by more or less than me normally do. We have noreason to expect in this environment we would beat them by morethan normal," said Chuck Hill, research director at ThomsonFinancial/First Call.

Although the earnings that have come in so far have beatestimates by an average of 2.3 percent, that is still wellbelow the average 3.0 percent over the past seven years, Hillsaid.

On the Economic Front

The latest economic numbers painted a mixed picture.

The Federal Reserve Board reported that U.S. industrial andmanufacturing output fell in June. Industrial output declinedby 0.7 percent versus a fall of 0.5 percent in May whilemanufacturing output was down 0.8 percent against a drop in Mayof 0.5 percent.

"It's basically the same as you've been reading in thenewspapers recently. I don't think things really havestabilized. Those are not user-friendly numbers," said DonnaVan Vlack, director of trading at Brandywine Asset Managementwhich oversees $7 billion.

Investors also got a conflicting picture for weekly U.S.retail sales. Store sales fell slightly, according to the Bankof Tokyo-Mitsubishi and UBS Warburg, while Instinet Research'sweekly Redbook Retail Sales Average inched up.

Federal Reserve Chairman Alan Greenspan is scheduled toaddress Congress on Wednesday and his testimony is expected tobe marked by optimism that the slumping economy is stabilizingand poised to rebound later in the year.

But promises of further aggressive interest rate cuts arelikely to be absent from the testimony, even though Greenspanwill emphasize that the economy remains at risk of furtherweakness, analysts said.

Monday’s Highlights

Stocks fell Monday, with technology leading the waylower as investors feared weak demand and fierce competitionwill prevent a swift rebound for the key computer chip sector.Investors also faced upbeat results from Citigroup and a solid report from Bank of America. But the Street got a dour profit forecast from The Bank of New York.

The tech-laced Nasdaq Composite Index fell 55.67 points, or 2.67 percent, to 2,029.12. The blue-chipDow Jones industrial average slid 66.94 points, or 0.64percent, to 10,472.12, and the broader Standard & Poor's 500Index lost 13.23 points, or 1.09 percent, to 1,202.45.

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