GDP Report Ignites a Rally on Wall Street
Stocks raced to their biggest gains in almost two weeks Thursday, as raw nerves about the WorldCom accounting scandal were soothed by a government report that the economy grew faster in the first quarter than previously thought.
Investors snatched up beaten-down shares after weeks of selling had put stocks at multiyear lows, allowing bulls to take firm control of the market late in the session.
But prices seesawed for much of the day after jitters about corporate accounting problems were reignited by rumors of irregularities at General Motors, the world’s largest auto maker. GM denied the rumors, but its stock, a Dow component, still fell $1.58 to $51.50.
“The market was hit by this GM story--which appears to be a fabrication by some short sellers--and we recovered that loss,” said Tim Anderson, stock trader with Salomon Smith Barney. “The market will be in a tug of war here for a couple of days as we deal with the end-of-quarter portfolio balancing.” The second quarter ends today.
Analysts warned that the market could continue to be at the mercy of rumormongers, with investors nervous about the possibility of more corporate accounting scandals--and mindful that the smart move in recent months has been to sell such stocks as WorldCom, Adelphia Communications and Global Crossing at the first hint of bad news.
On Thursday, the semiconductor sector carried technology stocks higher, boosted after Lehman Bros. raised its rating on the group.
The Dow Jones industrial average jumped 149.81 points, or 1.6%, to 9,269.92. The broader Standard & Poor’s 500 index climbed 17.11 points, or 1.8%, to 990.64. The tech-laden Nasdaq composite rose 29.87 points, or 2.1%, to 1,459.20.
Winners led losers by more than 3 to 2 on Nasdaq and the New York Stock Exchange. Trading was heavy for the second straight day.
The government said the economy raced ahead at its fastest clip in more than two years in the first quarter, up from earlier estimates, amid better-than-expected consumer spending and business investment.
“These numbers support the view that the economy is on a recovery path,” said Richard Cripps, chief market strategist at Legg Mason Wood Walker.
Lenders, including Citigroup and J.P. Morgan Chase, led the advance among blue chips, rebounding from declines Wednesday after WorldCom said it misstated earnings and sparked concern it would default on billions in debt. Citigroup gained $2.16 to $39.16, and Morgan added $1.23 to $32.72.
Treasury yields rose for the first time in three days on the economic news and the stock market rally. The yield on the benchmark 10-year Treasury note rose to 4.82% from 4.74% Wednesday. The dollar fell against the euro and the yen.
In other market highlights:
* The S&P; chip equipment index gained 4.3% and the SOX semiconductor index was up 3.1% after Lehman hiked its rating on firms in the chip-making sector, including Micron Technology, up $1.50 to $20.50, and Integrated Circuit Systems, up $2.24 to $20.24.
* Top chip maker Motorola rose after it said it would cut 7,000 more jobs to reduce costs and that it expected to take charges of about $3.5 billion but affirmed its forecasts for operating earnings for the second quarter and full year. Shares rose 41 cents to $14.45.
* Pfizer rose $1.75 to $36.75. The drug maker said it would explore options, including the sale of two consumer product lines, and set a $10-billion stock buyback.
* Advertising companies fell on fears that WorldCom’s accounting scandal may dampen telecom advertising spending, although analysts said no single U.S. advertiser had major exposure to the phone giant. Interpublic Group fell $1.76 to $23.51, and Omnicom Group lost $4.51 to $44.30.
* Hewitt Associates rose $4.50 to $23.50 in its first day of trading on the NYSE. The manager of employee benefits sold 11.2 million shares at $19 each, raising $212 million in its initial public offering.
* Qwest Communications International, which was knocked lower Wednesday on fears it could be caught up in troubles similar to WorldCom’s, snapped back sharply after saying it was cooperating with the Securities and Exchange Commission. Its shares rose 97 cents, or 54%, to $2.76.
Market Roundup, C5-6
