Surge in Tech Stocks Briefly Raises Hopes for a Recovery
An impressive rally in technology stocks Friday raised hopes that the market was finally in a sustainable recovery. But after trading ended, Wall Street was thrown for another jolt by a court ruling in the presidential stalemate.
The tech-stock surge in the regular trading session pushed the Nasdaq composite index up 6% and left it up 10.3% for the week, its best performance since June.
Bullish analysts argued that Friday’s rally, coupled with Nasdaq’s record-breaking leap Tuesday, suggested that the market had reached at least a short-term bottom from which a year-end rally could spring.
Nasdaq climbed 164.77 points to close at 2,917.43 on Friday, the highest since Nov. 17. The advance occurred despite a fresh wave of earnings warnings Thursday from major tech companies.
Other indexes also rose, though not as powerfully. The Dow Jones industrial average picked up 95.55 points, or 0.9%, to 10,712.91. The Standard & Poor’s 500 index gained 1.9%. Winners topped losers by more than 2 to 1 on Nasdaq and the New York Stock Exchange.
But minutes after the regular session closed, uncertainty returned when the Florida Supreme Court ordered that thousands of disputed ballots be counted--potentially prolonging the election stalemate that has caused jitters in the market for weeks.
The court’s ruling sparked an immediate plunge in stock index futures contracts, an indication that the market will open lower Monday.
“As long as you keep the uncertainty alive, it’s probably negative” for the market, said Jim Paulsen, chief investment officer of Wells Capital Management. “In the long run, it’s not going to matter much. But in the short term, it’s another reason to sell off.”
Nevertheless, Wall Street’s bulls chose to focus on the week’s good news--mainly, Federal Reserve Chairman Alan Greenspan’s comments Tuesday suggesting that the central bank may lower interest rates early next year.
If the Fed indeed eases credit, many analysts say the market, anticipating a pickup in the economy by midyear, should rally. Stocks were helped Friday by a report that the economy added fewer jobs last month than expected, further raising hopes for quick Fed action. In the bond market, yields finished mixed.
“We have basically ended that massive decline on Nasdaq,” said Barry Hyman, strategist at Weatherly Securities in New York. “Now the healing process begins, and it begins with Alan Greenspan.”
With Nasdaq still down 42% from its March peak, there were signs late last week that investors believe tech shares have gone as low as they should for now.
Chip giant Intel, which late Thursday warned of near-term profit weakness, nonetheless rose $1.69, or 5.2%, to $34 on Friday. Likewise, Motorola, which released a fourth-quarter warning early Thursday, rallied $1.50, or 8.5%, to $19.25 on Friday.
Also, bank stocks have rallied the last two days despite Bank of America’s earnings warning Wednesday. BofA gained $1.88 to $40.88 on Friday, and Citigroup rose $1.75 to $51.50.
“The [latest] bad news didn’t take the market any lower,” said Scott Bleier, chief investment strategist at Prime Charter Ltd., a New York investment bank. “That signifies that the market was washed out and that the bad news was already built in.”
In fact, some analysts argue that corporate profit warnings may actually help stocks now by encouraging the Fed to cut rates sooner or more aggressively.
“We have to worry about more bad news” as companies come to grips with the slowing economy, said Charles Blood, analyst at Brown Bros. Harriman & Co. “The question is whether it’ll be a depressant” on the market.
Bulls also are encouraged by the recent recoveries in former go-go tech stocks such as Juniper Networks, which closed Friday at $166.13, up $17.25, after falling as low as $103 only seven days ago.
Though the market may open lower Monday, anticipation of Fed rate cuts in 2001 will remain after the election is resolved, Blood said. “The economy is slowing. Neither Bush nor Gore can stop that from happening,” he said. “And they can’t stop the Fed from easing” rates.
Market Roundup: C4, C5
