Stocks Edge Up on Tech Surge

Stocks reversed early losses Wednesday and notched gains for the eighth session in the last 10 as investors put a positive spin on the latest batch of mixed economic and earnings reports.

The blue-chip Standard & Poor’s 500 index was down nearly 2% at midday after drug maker Eli Lilly cut its profit forecast, Morgan Stanley discouraged investors from buying phone stocks and the Federal Reserve’s latest “beige book” survey portrayed a listless economy.

But stocks rebounded as investors reacted to an earlier speech by Fed Chairman Alan Greenspan, who said U.S. productivity probably will be more robust than many expect, and focused on upbeat profit reports from such companies as software maker Computer Associates International, which raised guidance.

“There’s a great deal of apprehension -- and there’s a great deal of hope,” Hugh Johnson, chief investment officer at First Albany Corp., told Reuters. “You have an intersection between hope that the rally will continue and apprehension that this is another false start.”

The S&P; 500 closed 5.98 points, or 0.7%, higher, at 896.14, bringing its cumulative gain to 15.4% since the blue-chip barometer reached a five-year low on Oct. 9.

The Dow Jones industrial average climbed 44.11 points, or 0.5%, to 8,494.27, while the technology-heavy Nasdaq composite index surged 27.43 points, or 2.1%, to 1,320.23.

Winners outnumbered losers by roughly 5 to 3 on both Nasdaq and the New York Stock Exchange.

Despite the index gains, many stocks were hurt by shaky profit reports or brokerage analyst downgrades.

Eli Lilly dropped $4.91 to $58.09 after trimming forecasts for the fourth quarter, as generic competition slowed sales of its antidepressant Prozac.

Phone shares fell after Morgan Stanley analyst Simon Flannery lowered BellSouth, SBC Communications and Verizon Communications to “equal-weight” from “overweight,” saying valuations have gotten steeper based on profit forecasts for 2003.

SBC fell $1.20 to $25.85, BellSouth shed 49 cents to $25.80 and Verizon lost $1.02 to $36.73.

But big winners included Computer Associates, which climbed $2.65 to $14.75 after raising its forecast for fiscal 2003.

Tech bellwethers Intel and Microsoft also gave the leading indexes a major lift. Intel jumped $1.04 to $16.16 and Microsoft rallied $1.53 to $53.20.

Among chip equipment makers, Applied Materials soared $1.32 to $14.41 and KLA-Tencor climbed $2.16 to $32.71 despite warning that results in the current quarter could miss analysts’ expectations.

Walt Disney helped boost the Dow, rising 69 cents to $17.80 after Merrill Lynch increased profit estimates for the entertainment giant’s fiscal year 2003, citing an upturn in the advertising market.

Investors were lured to the Treasury market by benchmark 10-year note yields near seven-week highs and speculation that slow economic growth may spur the Fed to cut interest rates in the months ahead. The yield on the 10-year T-note slid to 4.23% from 4.26% on Tuesday.

In foreign stock trading, Brazil’s main index soared 5.5%, but in Europe, stocks slipped 4.5% in Germany, 4.1% in France and 2.7% in Britain.

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Market Roundup, C8-9