The stock market kicked off the first day of summer with a modest rally Thursday as investors brushed off dreary profit outlooks from companies such as chip designer Transmeta and pinned their hopes on a hefty interest-rate cut from the Federal Reserve.
Once again, "the stock market is ignoring all of the bad news that is coming out, either corporate or on the economy," said Stanley Nabi, managing director at Credit Suisse Asset Management.
The Fed is widely expected to cut interest rates by at least a quarter of a percentage point at its policy-setting meeting next Tuesday and Wednesday, but many investors are crossing their fingers for a steeper half-point cut.
The Dow Jones industrial average gained 68.10 points, or 0.6%, to end at 10,715.43.
Citigroup, up $2.90 to $53.55, and J.P. Morgan Chase, up $1.52 to $47.12, lifted the blue-chip Dow and led a broad rally in financial shares after investment bank Morgan Stanley Dean Witter beat lowered earnings expectations. The Philadelphia/KBW bank stock index rose 3.5%.
The Nasdaq composite index added 27.52 points, or 1.4%, to 2,058.76. The tech-laden index scored its third winning session in a row, but is still off almost 60% from its peak in March of 2000.
The broad Standard & Poor's 500 index rose 1.1% to 1,237.04.
Gainers led losers by 17 to 13 on the New York Stock Exchange and by 20 to 17 on Nasdaq. Volume was heavy on both markets.
Morgan Stanley jumped $5.60 to $64.95 on earnings that dropped 36% from year-earlier levels but still beat analysts' estimates by almost 4%. Wall Street had slashed its forecast for the investment bank amid the stock market slump.
The next two weeks will be the busiest periods for quarterly pre-announcements, when companies say whether they're likely to meet financial forecasts. So far, companies have issued 550 warnings. That's 8% lower than during the same point a quarter ago, according to Thomson Financial.
Transmeta, which designs power-saving chips for notebook computers, plunged 57%, or $7.24, to $5.36 after lowering its sales projection, citing a slowdown in shipments to its major market Japan.
In the bond market, Treasury yields continued to ease in advance of the Fed meeting. The yield on the benchmark 10-year Treasury note fell to 5.17% from Wednesday's close of 5.21%.
European bonds rallied after the European Central Bank kept its key interest rate unchanged at 4.5%.
Among Thursday's highlights:
* The tech sector was mixed, with Oracle up 38 cents to $17.90 and Intel down 22 cents to $27.27. Symantec fell as low as $44.50 in after-hours trading after closing at $61.31. The software maker slashed its quarterly profit forecast.
Multilink Technology, a maker of high-speed circuits, jumped more than 24% to $11.19 in its initial public offering on Nasdaq.
* Pasadena-based Avery Dennison slid $5.84 to $48.88 after the office products maker lowered its second-quarter profit forecast.
* Energy stocks lost ground after the recent 10% drop in crude oil prices. Among oil services firms, Halliburton fell $2.26 to $39.24 and Noble Drilling was off $1.85 to $36.25. Chevron, meanwhile, lost $1.01 to $93.46 and Phillips Petroleum was off $1.59 to $58.15.
Utility stocks also were off sharply. The Dow utility index sank 3.1%.
* Eastman Kodak rose $1.66 to $49.21 after the photo giant repeated its earnings guidance and said it expects to generate at least $6 billion of free cash flow between 2001 and 2005.
* Brazil's currency posted its biggest one-day gain in two years after the central bank raised interest rates and took out a $2-billion loan from the International Monetary Fund to help it support the real. The real surged 4% to 2.3775 per dollar. It had fallen to a record low Tuesday. The Brazilian stock market rose 1.7%.
Market Roundup, C5, C6