Stocks Higher After Volatile Trading Day
Stocks sprinted higher in a late rally Wednesday as investors, lured by beaten-down prices, put aside their worries over a tepid corporate profit picture and a stream of accounting scandals.
Optimistic earnings forecasts from consumer goods giant Procter & Gamble and mobile phone maker Motorola gave investors encouragement, and Microsoft led a surge in the final hour as traders speculated that the world’s biggest software maker might raise profit projections.
The Dow Jones industrial average climbed 100.45 points, or 1.1%, to 9,617.71 and the technology-heavy Nasdaq composite index gained 21.94 points, or 1.5%, to 1,519.12.
Analysts pointed to two encouraging signs: Both indexes closed near their highs for the day, and trading volume was heavy. However, despite the late-day rally, declining issues outnumbered advancers on Nasdaq and were about even on the New York Stock Exchange.
The blue-chip Standard & Poor’s 500 index rose a narrow 0.7%.
Uncertainty over the corporate profit picture kept a cap on gains. Analysts said doubts about the trustworthiness of corporate America also gripped investors, heightened by insider trading charges brought Wednesday against Samuel D. Waksal, former president and CEO of biotechnology company ImClone Systems.
“The reason to be optimistic is the economy and the market are correlated,” Chris Baggini, manager of the Gartmore Growth fund, told Bloomberg News. “Consumers are going to start to move the whole train.”
But some analysts discounted the day’s gains, attributing them to the trading practice of short covering. Short covering occurs when traders are forced to buy stock to replace shares borrowed earlier and sold “short” on the expectation of further declines.
“People are buying back to get even,” said Bryan Piskorowski, market commentator at Prudential Securities. “This is no brave new world. One day of short covering in June is not the silver bullet for the market.”
Earlier in the day, the Dow was down nearly 70 points as the market was buffeted by bad news. But investors were encouraged when the S&P; 500 managed to hold above the psychologically key 1,000 mark, traders said.
Tech heavyweights such as Microsoft, which surged $2.97 to $55.54, and Intel, up $1.36 to $21.58, helped lead the way into positive territory.
In other trading, Treasury bond yields were little changed. The U.S. dollar rallied against the yen and euro.
Among other market highlights:
* Maytag rose $2.97 to $45.27 a day after the appliance maker said it will earn more than previously forecast. Rival Whirlpool jumped $1.78 to $68.86.
Other consumer-related companies that rose included Procter & Gamble, up $4 to $93; Coca-Cola, up 48 cents to $54.44; and Wal-Mart Stores, up $1.85 to $58.30.
* In the tech sector, Motorola soared $1.21 to $15.66 after saying it will meet or exceed its forecasts this quarter, and Advanced Micro Devices rose 34 cents to $9.67 after Prudential Securities raised its rating on the chip maker’s shares to “hold” from “sell.”
But the overall tech outlook remains murky: Siebel Systems sank $2.48 to $15.18 after warning that its current quarter looks weak.
* Advertising giant Omnicom Group plummeted $15.28 to $62.28 after the Wall Street Journal said the company’s practice of making payments for acquisitions over several years may understate liabilities. Omnicom called the article “inaccurate.”
* CMS Energy Corp. dropped $2.10, or 14%, to $13.01, after Moody’s Investors Service cut its rating on the power company’s unsecured debt from Ba3 to B3, making it a low junk grade.
* Clear Channel Communications, Viacom and other media stocks fell on concern about accounting issues, the economy and another wave of consolidation in the radio industry. Clear Channel lost $3.91 to $45.89, Viacom fell $2.30 to $46.60, and newspaper publisher Dow Jones lost $1.86 to $51.26 after saying second-quarter profit will miss analysts’ forecasts because of lower ad sales.
* In Europe, France’s CAC-40 dropped 2.6%, Britain’s FTSE 100 slid 1.7% and Germany’s DAX index lost 2.1%. In other foreign trading, Japan’s Nikkei-225 index dropped 1.1%.
Market Roundup, C6-7
