Focus on Defense, Industrial Stocks Perks Up the Dow
The Dow Jones industrial average scored its biggest one-day gain in five weeks Wednesday as investors scooped up industrial and defense stocks and scoured the wreckage of the tech sector.
“The parade of bad news still marches in [tech] but ... there are other areas that are doing well,” said Erick Maronak, research director at NewBridge Partners. “After a very trying February and an OK March, investors probably figure things have come back a little and it’s not a bad idea to [buy].”
The Dow Jones industrial average climbed 173.06 points, or 1.7%, to 10,381.73--its biggest one-day point gain since March 4. The broad Standard & Poor’s 500 index rose 1.1% to 1,130.47.
The tech-laden Nasdaq composite index gained 24.50 points, or 1.4%, to 1,767.07, after hitting its lowest close in five weeks Tuesday.
Winners led losers by more than 2 to 1 on the New York Stock Exchange and by 3 to 2 on Nasdaq. Trading was active.
Profit jitters have plagued the market since a surprise warning from IBM on Monday. There was still plenty for investors to worry about as they braced for next week’s flood of earnings reports.
Shares of WorldCom tumbled 12%, losing 66 cents to $4.77, to hit near 10-year lows amid worries it would post grim results. And AOL Time Warner dropped $1.15 to $20.70, falling to lows not seen since 1998, as concerns about its growth prospects intensified after the head of its flagship Internet unit was replaced Tuesday.
“Earnings concerns are still out there,” said David Memmott, head of listed block trading at Morgan Stanley. “Next week is the real beginning of technology earnings, and with IBM warning a couple of days ago, there is a lot of nervousness out there. It looks like it’s going to be a tough quarter.”
Cisco Systems rose 73 cents, or almost 5%, to $15.55. IBM’s warning, its first in more than a decade, helped fuel rumors Tuesday that Cisco would warn as well, sparking a sell-off in the stock.
On Wednesday, however, Wall Street came to Cisco’s defense. Merrill Lynch said it believes Cisco will meet estimates, but the final weeks of the quarter will be crucial. UBS Warburg said it doesn’t believe a profit warning is likely.
Investors found plenty of other attractive stocks Wednesday. Industrial shares gaining on optimism about an economic recovery included GM, up $2.03 to $62.48; Caterpillar, up $1.61 to $59.49; and Honeywell, up $2.31 to $39.95.
Among other highlights:
* Consumer shares were strong. Procter & Gamble helped the Dow with a gain of $2.21 to $92.34 after Chief Executive A.G. Lafley said it should meet its long-term sales and earnings growth goals in fiscal 2003. Sears Roebuck, the No.4 U.S. retailer, jumped $2.98 to $54.18. The company forecast stronger-than-expected first quarter earnings.
* Shares of real estate investment trusts rose, continuing a powerful advance in recent weeks. The Bloomberg index of 148 REITs rose 1.1%. Prentiss Properties surged $1.20 to $31.45 and Centerpoint Properties jumped 75 cents to $56.75.
* Nvidia, which makes chips for the Microsoft Xbox game system, fell $2.25 to $38.51. Analysts are saying Xbox consoles may fall short of sales expectations. Microsoft rose $1.43 to $56.30.
* Biotechnology stocks rallied. Genentech, the world’s No.2 biotech company, jumped $2.07 to $43.12. After Tuesday’s close, the company said first-quarter net income more than tripled. And Idec Pharmaceuticals gained $3.76 to $61.70. The company said it expects quarterly earnings per share to jump from a year ago, driven by sharply increased sales of its cancer drug Rituxan.
* Allergan rose $3.91 to $62.61 after a UBS Warburg analyst raised his rating on the stock to “buy” from “hold.”
* In foreign trading, Mexico’s main share index rocketed 3.4% to a 52-week high. The Mexican market is up 18% this year.
Market Roundup, C6-7
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