Light Bargain Hunting Ends Three-Day Slide
Wall Street reversed a three-day slide Wednesday as investors returned to the market in search of bargains, shrugging off high-tech profit warnings and an analyst downgrade of Internet stocks.
The advance had little conviction behind it, however, as volume remained light and the major indexes lost more than half of their earlier gains. Investors were generally making few big moves as they awaited second-quarter earnings, including results from Yahoo and Alcoa that were released after the close.
But analysts said investors were making some bets on hopes for strong second-quarter results overall. A slight drop in oil prices also cheered the market.
“This is a little bit of a relief rally, certainly some bargain hunting,” said Peter Cardillo, chief strategist and senior vice president at S.W. Bach & Co. “This is a very nervous market, and it needs to hear better news from corporate America, telling it that the earnings growth is still in place. We’re not hearing that from the technology sector.”
The Dow Jones industrial average rose 20.95 points, or 0.2%, to 10,240.29.
Broader stock indicators were narrowly higher. The Standard & Poor’s 500 index gained 2.12 points, or 0.2%, to 1,118.33, and the tech-dominated Nasdaq composite index was up 2.65 points, or 0.1%, at 1,966.08.
Advancing issues outnumbered decliners by more than 4 to 3 on the New York Stock Exchange.
In the U.S. Treasury market, demand for a new five-year note fell short of lofty expectations. The $15 billion in new notes went at a high yield of 3.66% and drew bids for 2.33 times the amount on offer, below June’s 2.91 level.
“It was just a real average auction,” said Gerald Lucas, chief Treasury and agency strategist at Banc of America Securities.
The yield on the current five-year note was steady at 3.63%, while the benchmark 10-year Treasury note was flat at 4.48%.
Oil prices slipped 57 cents to $39.08 a barrel. Gold prices rose to $402.30, up $9.70, as the dollar slumped against the euro.
In other market highlights Wednesday:
* The Philadelphia semiconductor index added 1.1% after slumping 9.5% the previous three days. Intel, the world’s largest chip maker, climbed 23 cents to $26.34, and National Semiconductor advanced 72 cents to $19.71.
* Corporate software makers PeopleSoft and JDA Software Group both warned that their quarterly earnings would fall below analyst expectations. PeopleSoft rose 31 cents to $17.13, while JDA Software skidded 83 cents to $11.02.
* Yahoo fell $4.58 to $28.02 in after-hours trading after reporting earnings that were in line with analysts’ expectations, with net income rising 121.3% from a year earlier. Yahoo fell 62 cents to $32.60 for the regular session.
Analysts said the earnings report was solid, but that Yahoo’s outlook for the rest of the year wasn’t as bullish as Wall Street would have liked. Prudential Securities, meanwhile, downgraded the entire Internet sector to “neutral” from “favorable,” citing the possibility of a summer slowdown. Prudential singled out EBay, cutting its rating on the online auctioneer to “neutral weight” from “overweight.” EBay lost $2.97 to $86.87.
* Costa Mesa-based FileNet plunged $4.89, or 18%, to $23.04. The maker of software that manages documents said second-quarter profit was less than analysts’ estimates. FileNet earned 3 to 5 cents a share. The average analyst estimate was 12 cents, according to Thomson First Call.
* Alcoa, which reported its earnings after the session, missed Wall Street estimates by a penny despite nearly doubling its profit from a year earlier. Alcoa closed up 79 cents at $32.77 in the regular session but fell 76 cents to $32.01 in after-hours trading.
* Marathon Oil sank 74 cents to $37.09. The fourth-largest U.S. oil company lowered its estimate for second-quarter production and said it had a loss of $95 million on sales of contracts for North Sea natural gas.
