Profit Warning Clips Early Gains
Wall Street ended its three-day losing streak Tuesday, but stocks pared early gains after a late-afternoon profit warning from cigarette maker Philip Morris tempered investors’ optimism.
Before the announcement from Dow component Philip Morris, the three major U.S. stock indexes were rallying strongly, buoyed by rosy outlooks from tech and telecom bellwethers such as Oracle and Cisco Systems and positive comments on a U.S. economic recovery from Federal Reserve officials.
The Dow Jones industrial average closed up 27.05 points, or 0.3%, to 8,386 after failing to hold an earlier 145-point advance. The broader Standard & Poor’s 500 index gained 6.76 points, or 0.8%, to 882.95, and the technology-laden Nasdaq composite index rose 30.37 points, or 2.3%, to 1,349.56. The gains ended the market’s recent string of losses, which has raised fears that Wall Street’s autumn rally was losing steam.
Winners outnumbered losers by 3 to 2 on Nasdaq and the New York Stock Exchange in moderate trading.
Shares of Philip Morris weighed heavily on the Dow, plunging $5.95, or 14%, to $37.03. The company, which was the most active on the NYSE, said it couldn’t confirm its 2003 forecast because of soft domestic tobacco industry volume. The company cited an influx of cheap imported cigarettes.
Following the warning, the S&P; tobacco index slumped more than 13%, making it the worst-performing S&P; 500 industry group.
Adding to the market’s late-session swoon was a news report that terrorist leader Osama bin Laden praised recent attacks in Yemen, Bali and Moscow in an audiotape received by Al Jazeera, a Middle East satellite television station.
The Bin Laden report, which comes as the U.S. prepares for a possible attack on Iraq, “is bringing all the terrorism concerns back to light,” said Tom Schrader, head of listed trading at Legg Mason Wood Walker.
The news helped offset comments from Fed officials Tuesday downplaying worries about the future of the U.S. economy and setting an upbeat tone economists expect Federal Reserve Chairman Alan Greenspan to echo today in remarks to Congress.
“The pieces are in place to engender a gradual strengthening in economic activity in coming quarters,” Fed Vice Chairman Roger Ferguson said in a speech at Carnegie Mellon University. Three other Fed officials joined him in suggesting that the central bank’s interest rate cut last week was all the economy would need to accelerate from a current “soft spot.”
In commodities trading, gold prices rose to the highest levels in almost six weeks, but oil prices held steady even though Iraq’s parliament rejected the U.N. disarmament plan, raising prospects that Baghdad would balk at inspections and invite a U.S.-led war.
Gold rose $3.30 to $324.50 an ounce in New York trading, its highest since Oct 3. On the New York Mercantile Exchange, oil fell 4 cents to $25.90 a barrel, barely a dollar above 19-week lows struck earlier this month.
The dollar, meanwhile, was mixed, slipping against the euro and rising against the Japanese yen.
In other highlights:
* Cisco rose 71 cents to $12.87 after the company said backlog orders were up from September. Analysts use the data to gauge future sales. The SOX index of semiconductor stocks jumped 4% on Cisco’s data, making it the best-performing S&P; 500 industry group.
* Oracle rose 45 cents to $9.50 after Chief Financial Officer Jeff Henley said he sees a turnaround for the technology industry next year, forecasting a return to growth in 2003 for Oracle after two years of revenue declines.
* Motorola, the No. 2 maker of wireless phones, rose 37 cents to $8.75 after saying Monday it still plans to meet earlier fourth-quarter financial forecasts, good news for some investors who have been worried about a slow spending environment.
Market Roundup, C7-8
