Investors Optimistic Ahead of Bellwether's Report

N E W  Y O R K, June 7, 2001 -- Stocks rose, resuming a late-spring rally, as the market's vacillating viewof corporate earnings swung back to positive with upbeat talkfrom National Semiconductor.

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Meanwhile, much of the market's attention was focused onIntel and the company's business update, expected afterthe market close.

The Nasdaq composite index climbed 46.12 points, or 2.08percent, to 2,263.85, according to the latest data. The DowJones industrial average added 20.43 points, or 0.18 percent,to 11,090.67. The benchmark Standard & Poor's 500 index rose6.92 points, or 0.54 percent, to 1,276.95.

"Even though the earnings that are going to come out inthis next quarter are pretty weak, there's a sense that maybetech land is bottoming out," said Michelle Clayman, chiefinvestment officer at New Amsterdam Partners.

Semiconductor stocks led the charge higher after a tradegroup, the Semiconductor Industry Association, said theindustry will rebound in the second half of this year, grow 20percent in 2002 and 25 percent in 2003. The Philadelphia StockExchange's Semiconductor Index rose 7.68 percent to a highunseen since May 21.

Stocks to Watch

National Semi reported a loss on lower sales, but thechipmaker 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 themarket closes on Thursday, and traders are looking to theleading semiconductor maker to help give clues to the fate ofearnings 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 $1.62to $48.38. A Superior Court jury in Los Angeles ruled Wednesday thecompany must pay $3 billion to a cancer-stricken smoker, thelargest judgment against a cigarette maker in a lawsuit brought byan individual.

But what investors are most focused on are earnings, bracingthemselves for the upcoming second-quarter results that will bequite weak, Johnson said. Adding to investor wariness is theincreasing belief that third-quarter results will be even worse andthe uncertainty over whether business will improve by the end ofthe year.

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

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

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

But discounters including Wal-Mart, up 29 cents at $51.04, faredbetter. Wal-Mart said May sales were at the low end of its range of3 to 5 percent gains, and warned in that unseasonably cool weathercould hurt second-quarter profit margins.

Wall Street was also waiting on Intel, which was scheduled toprovided its first-ever midquarter financial update after the endof the regular session. Intel, a high-tech bellwether and Dowcomponent, was up $1.28 at $31.10.

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

Declining issues narrowly outnumbered advancers 8 to 7 on theNew 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 hurtingrevenues.

Financial services heavyweight J.P. Morgan Chase said itexpects lower trading revenues in the quarters ahead, whileleading computer maker H-P warned the slowdown in informationtechnology was becoming global, eroding some hopes for a smoothrecovery in the tech industry.

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

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