Microsoft, Fed Boost Stocks

N E W  Y O R K, June 28, 2001 -- Stocks soared today while Wall Street cheeredlower interest rates and a federal appeals court's reversal of thebreakup of Microsoft.

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The Dow Jones industrial average ended up 131.37 at 10,566.21,according to preliminary calculations, changing course after fourstraight sessions of declines that produced an aggregate loss of268 points.

Broader stock indicators also moved higher. The Standard &Poor's 500 index rose 15.16 to 1,226.23, while the Nasdaq compositeindex advanced 50.91 to 2,125.65.

Ruling Adds Fire to Rally

The court ruling on Microsoft, which came just before noon,reversed parts of a lower court finding that the software maker hadviolated antitrust laws.

Microsoft, the world's top software maker, rose $1.57, or2.2 percent, to $72.71. The shares, which reopened for tradingshortly before 3 p.m. ET after being halted through theafternoon, moved upward, underpinning both the blue chip DowJones Industrial Average and the Nasdaq.

The news intensified a rally in technology and blue chips thatbegan early in the session as investors decided the FederalReserve's interest rate cut Wednesday, though smaller than theywanted, was a reason to buy.

"Psychologically, this could help technology a little but itdoesn't change underlying fundamentals. The outlook is still poorfor most of the sector," said Rafael Tamargo, director of equitytrust at Wilmington Trust.

Other high-tech gainers included Oracle, up $1.14 at $19.18, andPMC-Sierra, which gained $1.73 to end at $29.15.

Blue chips were also strong across a variety of sectors. Alcoarose $1.54 to $40, American Express advanced $1.22 to $39.47 andWal-Mart moved up 87 cents to $49.37.

Delayed Reaction to Fed Move

The strong buying, though, was largely a delayed upbeat responseto the Fed's sixth interest rate reduction this year. On Wednesday,Wall Street was upset by the Fed's decision to cut rates a quarterof a percentage point, instead of the half-point many on WallStreet felt was in order.

But the market quickly got over its disappointment about thesize of the cut as investors opted to pick up shares that havefallen to bargain prices in recent weeks. Analysts said the end ofthe quarter, and prospects for an economic recovery in the secondhalf of the year, also contributed to the buying.

"The market seems to be used to the fact that thesesecond-quarter earnings are go to be ugly. The market is going tobe looking forward now," said Barry Berman, head trader for RobertW. Baird & Co. in Milwaukee.

But any sustained rise in stock prices will be gradual and hardfought, he said, adding, "In order for the market to make anysignificant move to the upside, it is going to need to see signsthat the economy has bottomed and that it is improving."

Investors since late May have been skittish because of a streakof bad news — more than 600 profits warnings this quarter alone -and the lack of a timeline for when corporate performance willimprove.

"We're still looking for a fourth-quarter recovery, but wewon't have any visibility about the fourth quarter until lateAugust," said Charles White, portfolio manager at AvatarAssociates, who said Wall Street is looking for signs of aturnaround.

More Market Movers

The market also got a lift from news that General Electric'sproposed purchase of Honeywell might not be dead after all.

Honeywell rose $1.20 to $38.20 on reports GE had offered to sella stake in one of its most prized units to win European Unionantitrust clearance for its $41 billion purchase of Honeywell. GEand European regulators had previously indicated such approval wasunlikely. GE rose 61 cents to $48.87. Both are Dow stocks.

And there was at least one sign that employment levels might bestabilizing. New claims for state unemployment insurance fell lastweek, the third sharp drop in a row, suggesting that the rash oflayoffs seen so far this year may be moderating.

Advancing issues outnumbered decliners slightly more than 3 to 2on the New York Stock Exchange. Volume came to 1.30 billion shares,ahead of the 1.14 billion shares reported on Wednesday.

International Trading

The Russell 2000 index, which tracks the performance of smallercompany stocks, rose 7.41 to 502.99.

Overseas, Japan's Nikkei stock average fell 1.2 percent.European stocks fared better. Germany's DAX index gained 2.4percent, Britain's FT-SE 100 advanced 0.5 percent, and France'sCAC-40 climbed 1.5 percent.

Wednesday’s Markets

Stocks finished mixed Wednesday, seesawing after theU.S. Federal Reserve cut interest rates by a quarter of apercentage point to help boost the sagging U.S. economy andleft the door open for more reductions.

For the third session in a row, blue chips fell slightlyand technology stocks eked out gains. Tech investors focused onan upbeat forecast by handheld computer maker Palm, which announced its business could turn the cornerlater this year.

The Associated Press and Reuters contributed to this report