Today's Market: Stocks Come Roaring Back

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Remember what fantastic days look like? Today's markets were almost unrecognizable in all their green glory and triple-digit gains.

Election uncertainty leading up to polling and the fallout since last Tuesday has been blamed for all the volatility in the markets the past two weeks. But investors are reminded every day that they have real worries about how earnings will shake out in upcoming quarters as the economy continues to show signs that its pace of growth is slowing.

Major Indices INDEX CHANGE % VALUE YR TO DATE Dow 163.81 1.56% 10,681.06 -7.1% S&P 500 31.69 2.35% 1382.95 -5.9% Nasdaq 171.55 5.78% 3138.27 -22.9% Russell 2000 10.36 2.17% 486.91 -3.5% TSC Internet 33.08 6.64% 531.20 -54.0% NOTE CHANGE PRICE YIELD 10-Year Treasury 2/32 99 23/32 5.768% Market data as of: 5:36 PM ET, Nov 14 2000

The markets were rallying today right from the open, ahead of any news about how the recount in Florida would play out. And a spike that occurred early in the afternoon was unmistakably election-related.

The sharp incline happened when an announcement came in that a judge in Florida said votes in the recount needed to be certified by 5 p.m. today. The Nasdaq and the Dow Jones Industrial Average settled back a bit as investors heard part two of the judge's decision, which said counties can file supplemental or corrected returns after that time. The judge also said an appeals process could still be activated. So we're close to a winner, right?

The markets got another boost about an hour after the decision from bullish comments by Christine Callies, Merrill Lynch's chief U.S. investment strategist. Callies said Merrill raised the equity portion of its balanced-fund asset allocation mix to 60% from 55% and reduced cash from 15% to 10%. "With moderately strong profit growth, stable interest rates, and ample liquidity likely to persist in 2001, equities are likely to outperform bonds and cash over at least the next three to six months," Callies said. "Our historical analysis indicated that the blue-chip indices outperform bonds about 59% of the time by an average of 3 to 4% over the long term under these conditions. Bonds should outperform cash about 63% of the time by about 3%."

The comments came on the heels of a note earlier today from Goldman Sachs' own bull Abby Joseph Cohen. In Cohen's note, she said equity valuations are the most attractive they've been all year. "Today's markets are priced for imperfection. We believe that the S&P 500 is about 15% undervalued on a 12-month view, and our model portfolio now suggests a market weight position, i.e., 35%, in technology and telecom."

But perhaps the biggest motivator charging up investors today was the fact the day started below 3000, a level it hadn't hit in a year. Smelling bargains, traders stepped back into the market with conviction.

The Federal Open Market Committee meeting tomorrow was taking some of the attention away from the election. Many investors are hoping the Fed will adopt a neutral bias. That would mean it isn't any longer worried that inflation is going to wreck havoc on the markets and that it likely won't feel compelled to raise or lower rates to tinker with the pace of economic growth. For a preview of the meeting, check out TheStreet.com's story on what the Fed could do tomorrow.

Oracle (ORCL Quote) was the most active stock on the Nasdaq today on news that it and Citigroup (C Quote) announced a strategic alliance in which they will integrate each others' technologies and services. The move helps position Oracle as a clearinghouse for business-to-business transactions over the Web. Oracle was up 14.7%, while Citigroup was 0.5% higher.

Having its own long jump today, glassworks cum optical maker Corning(GLW Quote) jumped 12.7% after it announced it is joining with Cisco(CSCO Quote) to make optical equipment for the Internet. Cisco rose 5.5% on the news.

The Nasdaq's biggest gainer was SDL(SDLI Quote), which was up $31.06 to $248.94. It was one of the optical component suppliers hit hard in last week's selloff.

Computer and imaging company Hewlett-Packard(HWP Quote) managed its own comeback today. It announced yesterday that it missed earnings estimates by a dime, helping to drive down computer makers and the broader market on Monday. Today, it gained 8.4%. The positive sentiment spread to IBM(IBM Quote) and Intel(INTC Quote).

Retailers also had a big day. Home Depot(HD Quote) and Wal-Mart(WMT Quote) issued earnings reports that were in line with estimates expected by analysts.

But there were a slew of retailers that actually beat expectations, including TJX(TJX Quote), Target(TGT Quote) and J.C. Penney(JCP Quote), which helped lift the S&P Retail Index 2.5% higher.

Still, TJX warned that it expects fourth-quarter earnings of 50 cents a share, 3 cents lower than analysts' estimates, because of weaker-than-anticipated sales during November. And Home Depot said it remained cautious about growth in the fourth quarter.

Market Internals

Breadth was positive on active volume.

New York Stock Exchange : 1,839 advancers, 976 decliners, 1.1 billion shares. 58 new 52-week highs, 36 new lows.

Nasdaq Stock Market : 2,581 advancers, 1,373 decliners, 1.8 billion shares. 35 new highs, 130 new lows.

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Most Active Stocks

NYSE Most Actives

• Nortel Networks (NT Quote): 31.4 million shares.

• Tyco (TYC Quote): 26.2 million shares.

• Lucent (LU Quote): 20.5 million shares.

Nasdaq Most Actives

• Oracle: 75.9 million shares.

• WorldCom (WCOM Quote): 61.8 million shares.

• Cisco: 58.9 million shares.

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Sector Watch

Financial companies got some relief from J.P. Morgan(JPM Quote), which traded 1.5% higher today. The American Stock Exchange Securities Broker/Dealer Index rose 1.8%.

All things tech were in the green. The Philadelphia Stock Exchange Computer Box Maker Index was up 5.8%. The Philadelphia Stock Exchange Semiconductor Index gained 5.7% and the Morgan Stanley High-Tech 35 jumped 6.3%.

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Bonds/Economy

Bonds were weaker after a solid performance in recent days that had been fueled as investors sought shelter from declining stock markets.

The benchmark 10-year Treasury note was 2/32 lower, to 99 28/32, yielding 5.768%.

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International

International

European markets closed solidly higher.

London's FTSE rose 2.2%. The CAC in Paris rose 3.1%, while Germany's Xetra Dax gained 3.3%.

The euro smelled like dead fish. It last traded at $0.8575.

Asian markets were mixed. Hong Kong had a plus-side tsunami, while Japan looked a little soggy. The Nikkei 225 slipped 4.6 to 14,660, while the Hang Seng rocketed up 361.8, or 2.4%, to 15,177.5. The yen last traded at 108.10.

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