Stocks End Higher on Bargain-Hunting

N E W  Y O R K, May 31, 2001 -- Stocks clambered higher, breaking a three-session losing streak, as investors took advantage of a grim sell-off a day ago and snapped up batteredshares.

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The Nasdaq composite index rose 26.07 points, or1.25 percent, to end at 2,110.57, according to the latest data,while the Dow Jones industrial average added 39.30points, or 0.36 percent, to 10,911.94. The benchmark Standard &Poor's 500 index was up 7.76 points, or 0.62 percent, to1,255.84.

"We have had a weak market in the last couple of days and Ithink people are saying, 'Hey, I have some cash sitting on thesidelines. Let's put some to work,"' said John Forelli, seniorvice president at Independence Investment Associates Inc.,which oversees $20 billion.

On Wednesday, the leading market indexes fell to two-weeklows.

For the month of May, the Nasdaq slipped 0.3 percent, theDow was up 1.6 percent, and the S&P 500 was up 0.5 percent.

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Buyers' enthusiasm on the last trading day in May was heldback after the government reported that the number of Americanssigning up for first-time unemployment benefits rose last weekto the highest level in a month. In an indication the pace ofhiring has fallen off, the number of people continuing to claimbenefits were the highest since November 1993.

"The jobless numbers, after turning better for a couple ofweeks, are now turning worse again, and that is a significantconcern," said Jay Mueller, economist and portfolio manager atStrong Capital Management, which oversees $45 billion. "Itmakes me concerned the unemployment situation is not ready tobottom and we have several months of deterioration ahead ofus."

Wall Street is now bracing for the key May unemploymentnumbers, set for release Friday. The report is expected toshow more job losses, as the economy struggles to pull out of aslowdown that began late last year.

The report will likely garner close attention from the Fed,which has left the door open for further interest-rate cutseven after an aggressive five reductions so far this year. Thefed funds rate is now at 4 percent, the lowest level in sevenyears.

The Fed has cut its short-term federal funds rate by 2.5percentage points to 4 percent so far this year to keep theU.S. economy from sinking into recession. Fed funds futurescontracts see a good chance for a quarter-point rate cut whenthe Fed's Open Market Committee next meets on June 26-27 — butno rate cuts beyond that.

Adding to the picture of a soft economy, the NationalAssociation of Purchasing Management-Chicago said theChicagoland Business Barometer fell in May to a seasonallyadjusted 38.7, from 38.9 in April. A regional index below 50signals a contracting manufacturing economy, while a readingabove 50 suggests expansion.

The U.S. National Association of Purchasing Managementindex, due on Friday, will shed light on the nation'smanufacturing sector, which represents about 20 percent of thetotal economy.

Stocks tumbled Wednesday after network computer makerSun Microsystems and telecom equipment makerAlcatel cut their earnings outlook, stoking fears the economic downturn will take another swipe at corporateprofits.

But technology shares have bounced back. JDS Uniphase, the world's largest supplier of fiber-optic components, gained 16 cents at $17.10, shaking off an investment downgrade. Wall Street house CIBC cut its rating and estimates, blaming deteriorating conditions in the sector.

"Because the Fed is so proactive in trying to get theeconomy going, investors have a positive bias to try get moremoney into stocks," said Dick Schmaltz, director of investmentat J. & W. Seligman, which oversees $35 billion. "Theydon't want to chase stocks, so when you have big down days likeyou did yesterday that gives them the feeling that they canleak more money into the market."

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Among individual issues, life insurer John HancockFinancial Services Inc. rose 95 cents to $39.61.Standard & Poor's said John Hancock would replace publisherHarcourt General Inc. in the S&P 500.

Xerox Corp. climbed 88 cents to $9.91. Thephotocopier maker, which is under investigation by U.S.regulators for how it booked revenues from its Mexicanoperations, said it had misapplied certain generally acceptedaccounting principles but had not recorded any fictitioustransactions.