A Little Bit of Optimism Sends the Dow Up 182 Points
The Dow Jones industrial average scored its second straight triple-digit gain Monday, as investors grew more optimistic that Wall Street might be recovering after two weeks of heavy losses.
The Dow’s advance accompanied a second day of strong gains by markets in Europe and especially Japan, where the benchmark Nikkei-225 index rose almost 5%, although Japanese stocks were giving up some of their gains in early trading today.
Despite the follow-through to the rally that began Friday, analysts warned that there are no guarantees that the gains would be sustained in the long term.
“I don’t see any conviction behind it,” said Tony Cecin, senior managing director and head of equity trading at U.S. Bancorp Piper Jaffray Inc. “We need to see three, four, five days of plus-Dow movement on increasing volume every day before people begin to feel this is something they can maybe pin their hats to.”
Indeed, the broader market was mixed. The Nasdaq composite index, moderately higher until early afternoon, closed down 10.19 points, or 0.5%, at 1,918.49. Wall Street’s broadest measure, the Standard & Poor’s 500 index, rose 12.86 points, or 1.1%, to 1,152.69.
The Dow industrials gained 182.75 points, or 1.9%, to close at 9,687.53, adding to Friday’s 115.30-point gain. It was the Dow’s biggest advance in four weeks; on Feb. 26, it rose 200.63 points. Advancing issues led decliners by 2 to 1 on the New York Stock Exchange and by 5 to 4 on Nasdaq.
Although the general atmosphere was improving, the market still showed its vulnerability.
Cisco Systems dropped 81 cents to $17.88, a multiyear low, after two analysts lowered their estimates for the computer networking company’s fiscal third-quarter and 2001 results.
Other losers on Nasdaq included Intel, which fell 50 cents to $28.31, Sun Microsystems, down $1.01 to $17.24, and Microsoft, which declined 50 cents to $56.06.
Sectors hard-hit in the last two weeks bounced back Monday, including health care. Merck rose $2.50 to $71.48 and Pfizer was up $1.21 to $38.74 as drug stocks rallied on rumors of a merger between Johnson & Johnson and Alza.
Many financial stocks also were higher, with Bear Stearns up 96 cents to $47.35, Comerica up $1.19 to $58.79, and Cigna gaining $2.02 to $105.03.
The market also drew some strength from expectations of lower interest rates, even though long-term bond yields rose for the day.
Alan Ackerman, executive vice president of Fahnestock & Co., suggested investors are anticipating that the Conference Board’s report on consumer confidence, due out today, will raise the prospect of a slowdown in consumer spending and encourage the Federal Reserve to lower rates again before it meets in mid-May.
In addition, the government reported Monday that new-home sales fell 2.4% in February, more evidence that consumers are cutting back.
Analysts said Monday’s advance, although a good sign, might not be sustainable because companies are still issuing warnings about disappointing quarterly earnings.
The coming week marks one of the busiest periods for corporate profit pre-announcements and could put any rally to the test. About 70% of the 903 earnings forecasts for the first quarter so far have been negative, according to First Call/Thomson Financial. That’s the highest percentage seen in the five years the firm has tracked such data.
Overseas, Japanese stocks were supported by hopes for speedier disposal of banks’ bad loans and a rally in computer chip stocks. The Nikkei jumped 647.77 points to 13,862.31 on Monday. In early trading today, the Nikkei was off about 200 points.
In European trading Monday, technology, media and telecom heavyweights sent bourses higher as the transatlantic stocks rebound from multi-month lows spilled over into a second straight session.
The FTSE Eurotop 300 blue-chip index rose 3.3% after gaining 2.2% Friday. In London, the blue-chip FTSE-100 surged 3.2%, propelled higher by a rebound in banks and telecom issues.
Among Monday’s highlights:
* A proposal by California’s top power regulator to increase electricity rates by as much as 40% gave a spark to the state’s two main power providers. PG&E; rose $3.10, or 29%, to $13.75, and Edison International shot up $3.35, or 30%, to $14.55. Most other utility shares also soared.
* Home Depot jumped $1.68 to $41.35 after brokerage Salomon Smith Barney raised its investment rating on the stock. Wal-Mart, a Dow component, climbed $2.03 to $49.60.
* In the tech sector, computer networker Brocade Communications dived $5.60 to $24.34, a 52-week low, after Morgan Stanley Dean Witter downgraded the stock.
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Market Roundup, C12, 14
