Today's Market: Stocks Climb on Word of Tax-Cut Deal

Wall Street never met a tax cut it didn't like, and today was certainly no exception.

After a sleepy morning on Wall Street, investors' eyes popped open this afternoon with the news that House and Senate Republicans had struck a tentative deal for $1.35 trillion in tax cuts over 11 years.

Shortly after 12 p.m. EDT, when the headlines hit the wires, the Nasdaq Composite Index began its ascent. It had been trading in negative territory before that time. The index finished ahead 52 points, or 2.5%, to 2168.20. Meantime, the Dow Jones Industrial Average , which traded above the flatline for the entire session, ended up 163.37 points, or 1.5%, to 10,898.34, its highest level since Feb. 13.

"Considering that the market was lackluster for most of the day, the news had a positive impact on stocks," said Brian Belski, market strategist at U.S. Bancorp Piper Jaffray. "Whether or not it will continue, in the wake of such a strong April, remains to be seen."

This afternoon, Sen. Trent Lott (Miss.-R) confirmed that Senate and Congressional Republicans had struck a tentative deal. Even though they agreed on a tax cut, they had been divided on government spending. The Senator stressed that the deal is not final until the full budget resolution is agreed upon.

While the tax deal was an impetus for this afternoon's gains, traders said that a positive bias was already in place today. "Investors are thinking the glass is half full," said Rob Cohen, co-head of listed trading at Credit Suisse First Boston. "They believe managements' forecasts for the second half of the year, but they are waiting for the next catalyst."

With this afternoon's gains, the Dow is in positive territory for the year; it rose above the flatline Friday, but fell back below it on Monday. The blue-chip index was strengthened by Procter & Gamble (PG Quote), which reported better-than-expected fiscal third-quarter earnings this morning. The consumer products giant finished up 4.1% to $64.18.

Despite registering its strongest monthly percentage gain since April 1999 last month, the Nasdaq is still down 12.2% for the year; and it's 56% off its all-time high. Earlier today, the Comp saw weakness in its semiconductor and networking components, the very same groups that paced the rally in April. But those groups reversed course in afternoon trading.

Just as it was yesterday, trading volume is light on both the New York Stock Exchange and Nasdaq. (Some Asian and European markets are closed for the May Day holiday.)

In economic news today, the National Association of Purchasing Management's purchasing managers' index showed contraction in the manufacturing sector for the ninth month in a row. But since today's data did not contain any surprises, it wasn't having too much of an impact on the market this afternoon.

The PMI, which polls manufacturing executives around the country, rose to 43.2 in April from 43.1 in March. Economists polled by Reuters were expecting the index to rise to 43.8. Any reading less than 50 indicates a contraction in the manufacturing sector, while a figure above 50 indicates expansion.

In response to the data, which fueled speculation about a half-point interest rate cut this month, bonds gained momentum. The benchmark 10-year Treasury note gained 12/32 to 97 27/32, yielding 5.284%. Yields move inversely to prices. The 30-year Treasury bond, otherwise known as the long bond, finished up 20/32 to 94 26/32, yielding 5.739%.

This morning, Procter & Gamble posted third-quarter earnings of 71 cents a share vs. 64 cents a share a year ago, excluding restructuring charges. That beat the Street's consensus expectation of 69 cents a share. The company recently said it is considering selling its Jif peanut butter and Crisco oil brands because the products are dragging on the company's financial health.

Shares of Dell (DELL Quote) fell 1.8% to $25.76, after Merrill Lynch analyst Steve Fortuna lowered his fiscal 2002 earnings estimate for the boxmaker. "We are taking this opportunity to reassess our numbers for Dell in light of the current difficult environment," said Fortuna in a research note. The firm reiterated its buy rating on the company.

Beleaguered "name-your-own-price" portal Priceline.com (PCLN Quote) jumped 36% to $6.59, following an upgrade to market outperform from market perform by Goldman Sachs analyst Anthony Noto. "Priceline is still in a turnaround phase, but the progress made to date positions the company to better control its destiny with Q1 potentially its last unprofitable quarter," Noto said in a note.

Market Internals

Market Internals
Exchange	Advancers	Decliners	New Highs	New Lows	Volume
New York Stock Exchange	1,872	1,174	106	14	1.2 billion
Nasdaq Stock Market	2,366	1,510	123	25	1.9 billion

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Most Active Stocks

NYSE Most Actives
Company	Shares Traded
Reliant Resources (RRI Quote)	26.4 million shares
Lucent Technologies (LU Quote)	23.9 million shares
EMC (EMC Quote)	17.1 million shares

Nasdaq Most Actives
Company	Shares Traded
Cisco (CSCO Quote)	80.9 million shares
Oracle (ORCL Quote)	62.3 million shares
Dell (DELL Quote)	47.5 million shares

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International

In overseas trading, stocks fell in the U.K., led by banking giants Barclays and HSBC Holdings on concern the Fed will no longer cut rates as aggressively in the near term as it has since the start of the year given recent signs of economic health. Banking stocks are helped by lower rates because they make it cheaper for consumers and companies to borrow.

The U.K.'s benchmark FTSE 100 fell 36.6 points to 5930. Most European stock markets were closed for the May Day holiday.

British Telecommunications (BT Quote) confirmed it is in talks with rival Vodafone(VOD Quote) to sell its 20% stake in Japan Telecom, the No. 3 carrier in Japan, for $4.3 billion. BT also said it might dump its 18% share of Spain's Airtel for a few billion greenbacks. Shares of BT rose in Europe, while Vodafone fell.

In Asia, Japanese shares rose to a record high for the year, boosted by hopes for economic reform and upbeat earnings news. The benchmark Nikkei 225 closed at 14,425.46, the highest close since December 18 and up 491.14-- or 3.5%-- from Friday close. The stock market was closed on Monday for a national holiday.

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