Tech Stocks Drive Rally
Wall Street continued to rally Thursday, driving key indexes up sharply amid surging trading volume.
Whether the long bear market is finally over is still unclear. But for many big investors, missing any substantial rebound would compound the poor performance of the last 2 1/2 years.
A positive profit report from Hewlett-Packard Co., and some fresh data suggesting the economy is picking up, helped boost the Dow Jones industrials 222.14 points, or 2.6%, to 8,845.15, the highest close since Aug. 26.
The technology-dominated Nasdaq composite index leaped 48.20 points, or 3.4%, to 1,467.55 -- its best level since June 19.
Although many investors remain worried that stocks’ rebound from five-year lows in mid-October could soon fizzle, optimists say the market finally is shaking off the bad news of the last two years and expecting better times in 2003.
“Investors are clearly looking for good news, and they’re starting to get some,” said Doug Foreman, chief investment officer for domestic equities at Trust Co. of the West in Los Angeles.
Meanwhile, he said, “All the things that caused the bear market are yesterday’s stories” -- among them, accounting scandals, a collapse of capital spending in the tech sector and severe overvaluation of many stocks.
The calendar also is helping, analysts said. Many institutional money managers, who invest for insurance firms, mutual funds and the like, are anxious to reduce their year-to-date portfolio losses. To do that, managers will have to be fully invested if stocks continue to climb between now and Dec. 31.
Big investors’ eagerness to get on board showed in Thursday’s soaring trading volume. New York Stock Exchange trading rose to its highest level since July. Winning stocks outnumbered losers by more than 2 to 1 on the NYSE and on Nasdaq.
“The volume tells you this is real,” said Kevin Marder, strategist at Ladenburg Thalmann Asset Management in L.A.
Some investors sold bonds to buy stocks, sending longer-term Treasury yields to four-week highs.
The news on the economy Thursday was upbeat. The Conference Board’s index of leading economic indicators in October halted a four-month decline. And weekly claims for jobless benefits hit a four-month low.
Other recent data have been mixed, raising questions about the economy’s ability to mount a strong recovery in 2003.
But with the Federal Reserve’s cut in its key short-term interest rate on Nov. 6, one day after voters handed the Republican Party control of Congress, money managers increasingly see the odds as favoring a healthier economy, said Jack Ablin, chief investment officer at Harris Trust in Chicago.
“There’s a feeling that the Fed, and federal fiscal policy, are going to trip over themselves to get the economy going again,” he said.
A stronger economy, in turn, would be expected to translate into higher corporate earnings, underpinning stock prices.
Investors on Thursday poured into many stocks that are classic “cyclical” plays -- companies that would benefit from a pickup in consumer and business demand for goods and services. General Motors gained $3.20 to $38.50 and International Paper rose $1.65 to $37.41.
Also, General Electric advanced $2.05 to $26.85 despite lowering its earnings outlook for 2002 because of costs to bolster reserves at its reinsurance unit. The $1.4-billion expense was less than analysts had expected. GE also cheered investors by raising its quarterly cash dividend 1 cent a share, to 19 cents.
Profit hopes got a lift after Hewlett-Packard late Wednesday reported quarterly earnings that beat expectations. HP shares zoomed $2.14, or 13%, to $18.99, the highest since May. The stock is up 70% since Oct. 9.
Other tech shares also rallied sharply Thursday. An index of semiconductor issues rose 8%.
Traders said the snap-back in depressed tech stocks is being helped by “short covering,” as investors who had borrowed and sold the shares, counting on further declines, rush to buy them back to close out their bets.
The Nasdaq index has surged 31.7% from its five-year low reached on Oct. 9. The Dow has risen 21.4% in the same period and the Standard & Poor’s 500 is up 20.2%.
Year-to-date, Nasdaq still is down 24.8%, the S&P; 500 is down 18.7% and the Dow is off 11.7%.
Market Roundup, C5-6