Stocks Extend Rally for 2nd Day on Cisco Gains
A late-session rally pushed stocks higher Wednesday, lifting the market for a second day as investors piled into beaten-down issues in hopes technology bellwether Cisco Systems’ higher quarterly earnings boded well for corporate profits.
Stocks had swayed between gains and losses throughout the session, but investors put their pessimism aside in the final hour of trading. A report showing consumer credit expanded in June also helped, traders said.
The Dow Jones industrial average closed up 182.06 points, or 2.2%, at 8,456.15. The average jumped at the open, then slid in and out of negative territory throughout the day. The blue-chip measure rose 2.9% Tuesday.
The broader Standard & Poor’s 500 index gained 17.20 points, or 2%, to 876.77, while the technology-laced Nasdaq composite index was up 21.35 points, or 1.7%, to 1,280.90. Nasdaq leapt more than 3% at the open after gaining more than 4% on Tuesday.
Advancing stocks led decliners by about 2 to 1 on the New York Stock Exchange and 9 to 8 on Nasdaq in moderate trading.
Cisco, Nasdaq’s most actively traded issue, gained 92 cents, or 7.6%, at $12.99 after the No. 1 maker of gear that directs Internet traffic posted profit that topped consensus estimates. Cisco also almost tripled its stock buyback program to $8 billion.
But the firm said customers remain cautious about spending and posted revenue that fell short of analysts’ forecasts. “It wasn’t that Cisco’s numbers were great, they just weren’t horrible,” said Tony Dwyer, chief market strategist at Kirlin Securities. “Given the environment, Cisco did well.”
In other news, wholesalers in June boosted inventories at the fastest rate in 19 months, a hopeful sign for U.S. economic recovery.
Stocks had gained Tuesday on hopes the Federal Reserve may cut interest rates sometime this year to shore up the economy. The Fed is scheduled to meet next week. One trader said such hopes could have fed the late-session gains.
“You have the Fed next week and there is a lot of speculation about a further easing of rates for the rest of the year,” said the stock index futures trader. “But volume is light and the [upward] break was done on very thin volume.”
Treasury yields ended mostly lower after rebounding Tuesday. The six-month Treasury bill yield fell to a record low of 1.54% from 1.61% Tuesday, and the two-year T-note dropped to 1.98% from 2.04%, reflecting the growing expectation of a Fed rate cut.
But the government’s auction of $18 billion in new 10-year notes attracted relatively few bids. Total bids were $23.2 billion, a low amount for the size of the auction. The average yield was 4.39%.
In other trading, oil prices fell 67 cents to $26.50 a barrel after the American Petroleum Institute reported the biggest weekly drop in U.S. refining since early March, signaling weak demand. Gold futures had their biggest gain in six months, while the dollar weakened against the yen and euro.
Among Wednesday’s other highlights:
* Retailers of clothing and other discretionary items fell on concerns that consumers may cut back spending. Limited Brands declined 86 cents to $14.74 and Dillard’s slipped 50 cents to $22.40. Discount chains and purveyors of staples such as food rose. Wal-Mart Stores gained $1.10 to $48.38. Costco Wholesale rose $1.31 to $34.53.
* Telephone companies had the biggest declines in the S&P; 500 after Cisco Chief Executive John Chambers said, “We remain concerned about service-provider business on a global basis.” Verizon, the biggest local-phone service company, fell 40 cents to $29.47. Dow member SBC Communications fell 37 cents to $25.72. BellSouth lost 54 cents to $23.97.
* Dow member Boeing added $1.69 to $41.10. Ryanair Holdings said shareholders approved plans to buy 100 Boeing 737-800 planes over the next seven years and take options on 50 more.
* TMP Worldwide, owner of the Monster.com job-search Web site, tumbled $4.15, or 33%, to $8.63 the day after it said it will cut more jobs and lowered its profit forecast after revenue tumbled for a fourth straight quarter.
Market Roundup, C7-8
