Market Update: Dow Joins Nasdaq on the Positive Side

(Updated from 11:20 a.m.)

Sparked by optimism about the economy, there were flickers of light on Wall Street today.

The Chicago purchasing managers' index , released at 10 a.m. EDT, rose to 44.4 in June from 38.7 in May, well above expectations and its highest reading since December. The report shows that manufacturing in the Midwest is still contracting, but less severely than it was in recent months.

The revised estimate for first-quarter the gross domestic product , however, was lowered to an annual rate of 1.2%, compared to the earlier 1.3% estimate. The government also reported that corporate profits declined by 6.2% in the first quarter, the sharpest drop in three years, and much more than the 3.1% decline estimated a month ago.

Tech stocks and blue-chips were rising. The Dow Jones Industrial Average was off 3 points to 10,564, while the Nasdaq Composite was higher by 26 points, or 1.2%, to 2152. The S&P 500 was ahead 4 points, or 0.3%, to 1230.

The Russell 2000 was having a nice day, gaining 1.3% as bargain-hunters sought after names that will no longer be in the index on July 1. After today's close, the annual Russell rebalancing -- which forces money managers running funds that track the index to buy and sell stocks accordingly -- will be in place.

Major Indices INDEX CHANGE % VALUE Dow 22.81 0.22% 10,589.02 S&P 500 6.93 0.57% 1233.13 Nasdaq 30.91 1.45% 2156.37 Russell 2000 5.91 1.17% 508.90 TSC Internet 3.21 1.36% 239.25 NOTE CHANGE PRICE YIELD 10-Year Treasury 9/32 97 5/32 5.380% Market data as of: 12:30 PM ET, Fri Jun 29 2001

Stocks got a boost Thursday in the wake of the latest interest-rate cut as well as the court ruling yesterday that set aside a lower court's decision to break up Microsoft (MSFT - Cramer's Take - Stockpickr). The ruling was a burst of radiance on the gloom of preannouncement season. Microsoft was lately trading down, though, off by 1.1% to $71.95.

"The market put in a good performance yesterday based on people digesting the Fed rate cut," said John Peluso, head of listed trading at Lehman Brothers. "There should be continuation of the rally, as the end of the quarter bodes well for the upswing." Portfolio managers have been window dressing, or tidying up their portfolios to present to shareholders, in anticipation of the end of the quarter today.

Peluso, however, said the market is still susceptible to "surprises," like this morning's earnings warning by Dow Chemical (DOW - Cramer's Take - Stockpickr), the second-largest U.S. chemical company. Dow said it would miss its previous second-quarter earnings guidance because of weaker-than-expected demand. Dow was lately up 0.2% to $34.10.

But investors are willing to shake off some warnings. Last night, communication chipmaker PMC-Sierra (PMCS - Cramer's Take - Stockpickr) said after the bell that its earnings and revenue for the second quarter would be lower than expected. PMC-Sierra was lately up 4.6% to $30.50.

Chip stocks in general were higher. The Philadelphia Stock Exchange Semiconductor Index was up 3.2%. Transportation stocks and oil stocks were also higher. Insurance and bank stocks were slipping.

Market experts caution that any rally in the market could be short-lived, because investors might soon have to pay heed to the latest warnings. Earnings season kicks in soon after the July Fourth holiday next week.

While the market is expected to move higher in the short-term, market analysts say the gains may not stick. "The Fed just cut rates, there's quarter-end window dressing, and the market is headed into a holiday week," said Fred Maudsley, managing director of trading at Gruntal. "These are all artificial things."

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