Dow Up 61 as Earnings News Extends Rally
U.S. stocks rose for the fourth time in five days as better-than-expected earnings from Sun Microsystems spurred optimism that computer-related shares will continue their rebound.
Rising stock markets across Asia and Europe also gave U.S. shares a boost, traders said.
Sun Microsystems joined Intel and Motorola among large technology companies reporting this week that profits were largely unaffected by the Asian economic crisis.
“Most of the companies that were planning to announce bad news have already done so, so I think we’re headed into a period where companies will deliver good earnings,” said Edwin Miska, a money manager at Evergreen Asset Management Corp. in Purchase, N.Y., which oversees $12.5 billion.
The Dow Jones industrial average rose 61.78 points, or 0.8%, to 7753.55. It had been up more than 111 points earlier in the session before a monthly expiration of equity and index options sent the 30-stock average into a retreat. Though the Dow closed down almost 93 points Thursday on concern about the pace of profit growth, it is still up 2.3% for the week--recouping about half of last week’s decline, its worst in eight years.
The Standard & Poor’s 500 rose 10.78 points, or 1.1%, to 961.51, and recorded a 3.7% weekly gain. The Nasdaq composite index rose 15.82 points, or 1%, to 1562.88, picking up 4% for the week.
In a positive sign for the market, stocks enjoyed a broad-based rally Friday on a 16% jump in trading volume from Thursday. On the New York Stock Exchange, 2,131 stocks rose and 821 fell. About 666 million shares changed hands on the Big Board, 15% above the three-month daily average.
Sun Microsystems rose $2.06 to $45.13. Analysts at PaineWebber and Merrill Lynch boosted their investment recommendations to “buy.” The company said its fiscal second-quarter profit rose 25%, spurred by strong sales of its high-performance servers and storage devices.
The Morgan Stanley high tech index rose 1.36 points to 443.81, and gained 5% on the week. The index of computer-related shares has risen 98% in the last three years; the S&P; 500, by comparison, climbed 99% during that span.
“Tech stocks are the leaders in this market, so as technology stocks go, so goes the market,” said Richard Ciardullo, head of trading at Liberty Asset Management in St. Petersburg, Fla., which oversees about $6 billion. “When those stocks do better, more money comes into the market.”
Rising overseas markets eased concerns that Asia’s economic slowdown will crimp demand for stocks around the world. Hong Kong’s Hang Seng index rose 3.7%, and Japan’s Nikkei 225 index climbed 6.1%. Indonesia’s main stock index jumped almost 7% in response to the Jakarta government’s agreement to abide by stricter economic reforms laid out by the International Monetary Fund.
In Europe, Britain’s stock market rose 1.9%, France’s main index gained 1.5% and Germany’s climbed 1.8%.
Bond prices suffered after the Japanese government said it would take steps to boost its troubled economy. Combined with the rally in the Asian stock markets, investors shifted money back into stocks as “flight-to-safety” bond buying dried up.
The yield on the 30-year Treasury bond rose to 5.80% from 5.74% at Thursday’s close.
The dollar fell to a one-month low against the yen after Japanese Prime Minister Ryutaro Hashimoto said he’d support a plan to let banks mark up the value of their property holdings to current prices, making it easier for them to pay back loans in danger of default. The dollar closed at 129.30 yen, down 0.51.
So far, 76 companies in the S&P; 500 have reported earnings for the quarter ended Dec. 31. Of them, 56% topped expectations, 18% fell short of estimates and the rest were in line. At this point last quarter, about 55% of the companies had exceeded forecasts and 25% were below.
Stock, bond and commodities markets will be closed Monday in observance of Martin Luther King Day.
Among U.S. market highlights Friday:
* Nordstrom tumbled $4.63 to $44.87 after the retailer told investors that fiscal fourth-quarter earnings won’t meet estimates because of slower-than-expected holiday sales and steeper markdowns.
* Regal Cinemas surged $4.06 to $31.19 before trading was halted. Kohlberg Kravis Roberts & Co. is in talks to buy the movie theater operator in a transaction valued at more than $1 billion, people familiar with the negotiations said.
* Seagate Technology, the world’s largest independent maker of computer disk drives, fell $1.13 to $18.50. The company plans to cut about 10% of its work force, or 10,000 jobs. Workers in Malaysia and Thailand will be fired starting next month because of falling sales.
* The rallies overseas helped the American depositary receipts of some Japanese and European companies gain. Sony jumped $4.87 to $94.69, Honda Motor climbed $4.13 to $76.25, Hitachi rallied $5.19 to $77.13, Barclays rose $4 to $114.50 and British Telecommunications rose $3.75 to $89.50.
* Teltrend fell 87 cents to $14.13 after it said it expects earnings for its fiscal second quarter ending Jan. 31 to fall below analyst estimates. The telecommunications equipment company forecasts a profit of 12 cents to 14 cents a share, below the 23 cents expected.
* Among technology companies, Ascend Communications rose $1.13 to $30.06, Microsoft jumped $2.94 to $135.25 and International Business Machines gained $1.56 to $105.
