Stocks Rise With Hope for End of Profit Slide
Stocks rallied Wednesday after General Motors and software maker Intuit said business was unlikely to get worse--boosting hopes that recent interest-rate cuts are halting the slide in corporate profits.
“These are the first signs rate cuts are showing results here,” said Michael Lyons, a trader for Morgan Stanley. “Any hint of good news is well received.”
The gains came a day after the Federal Reserve cut interest rates for a seventh time this year, and marked a reversal--at least for one day--of market sentiment. Investors on Tuesday focused on the economy’s weakness and sent stocks spiraling to lows unseen since April.
The technology-laden Nasdaq composite index Wednesday reversed early losses to rise 28.71 points, or 1.6%, to 1,860.01, while the blue-chip Dow Jones industrial average climbed 102.76 points, or 1.0%, to 10,276.90. The broader Standard & Poor’s 500 index gained 8.05 points, or 0.7%, to 1,165.31.
Trading was moderate. Winners outnumbered losers 3 to 2 on the New York Stock Exchange and by 4 to 3 on Nasdaq.
GM underpinned the Dow with a gain of $1.50 to $57.20. The company said it would meet its profit forecasts, good news after Ford Motor last week warned of weaker profit for the rest of the year and announced as many as 5,000 job cuts.
Both auto makers have seen profits squeezed this year by shrinking market share and uncertain consumer demand, but GM said sales were supporting production.
Intuit posted a quarterly loss that doubled from last year due to a drop-off in highly profitable Internet advertising and marketing fees. But the company said it would meet financial targets for its new fiscal year. Intuit soared $6.59 to $36.04.
Semiconductor equipment stocks jumped after an industry group said the three-month average of worldwide bookings in July rose to $764.2 million, up 5% from June, suggesting the battered industry may be seeing a turnaround. The stocks, often seen as tech bellwethers, have seesawed this summer as investors have puzzled over conflicting reports for the industry’s outlook. Applied Materials rose $1.89 to $43.90, and KLA Tencor was up $2.44 to $48.79.
Semiconductor products maker Semtech surged $6.05 to $36.25. The firm said its fiscal second quarter income fell by more than half from a year ago, but forecast sales growth of 3% to 5% this quarter from last.
In other markets, the dollar fell to five-month lows against the euro and the British pound, while bond yields rebounded after sliding Tuesday following the Fed’s rate cut.
Among Wednesday’s highlights:
* AOL Time Warner dropped 40 cents to $39.50. The company said it would restructure its flagship AOL Internet unit and take a charge in the current quarter.
* Giving both the Dow and Nasdaq a lift was chip maker Intel, which rose 89 cents to $27.96. The Dow also got a boost from IBM, up $2.07 to $103.96.
* Retailer J.C. Penney fell $1.33 to $25.05 after affirming its earnings estimates for the current quarter and the year. At the low end of its ranges, Penney would miss analysts’ expectations.
* Drug marketer Professional Detailing fell $3.61 to $34.53 after it said it would evaluate its options after a federal appeals court reversed a lower court order preventing generic competition for an antibiotic the company markets.
Market Roundup, C5-C6
