Today's Market: Rate-Cut Rally Pushes Up Nasdaq 2%, Dow 1%

Initial jobless claims fell again. Honeywell jumps on news that GE may be willing to divest more to save deal.
By Yi Ping Ho ,

(Updated from 9:47 a.m. EDT)

On the day after, investors were in a positive mood.

Stocks closed mixed yesterday after the

Federal Reserve cut short-term interest rates by 25 basis points. This morning, a number of tech stocks were moving higher, and major market averages were edging up. And the number of people filing for first-time unemployment benefits fell last week.

The

Nasdaq Composite Index was lately up 44.6 points, or 2.2%, to about 2120; the

Dow Jones Industrial Average was rising about 123.5 points, or 1.2%, to 10,558; and the

S&P 500, which tracks the broader market, was up 12 points, or 1%, to 1223.

"The market this morning has a decent tone," said Rob Cohen, co-head of listed trading at

Credit Suisse First Boston

.

A number of tech names were moving higher in early action.

Sun Microsystems

(SUNW) - Get Report

,

Cisco

(CSCO) - Get Report

and

Intel

(INTC) - Get Report

were among the gainers. Sun was lately up 3.4% to $15.47; Cisco was up 4.6% to $18.76; and Intel was rising 3.1% to $29.55.

And the ongoing $41.2 billion takeover saga of

General Electric

(GE) - Get Report

and

Honeywell International

(HON) - Get Report

is back in the news. GE made a last-minute effort to win the approval of European regulators by saying it would divest 19.9% of its aircraft-leasing operation, GE Capital Aviation Services. Honeywell jumped on the news, because it revives the chances the deal could happen. It was lately up 7.7% to $39.85. GE was off 1.4% to $47.60.

Earnings season won't kick off until after the July Fourth holiday. Until then, the drone of earnings warning wages on. Last night, networker

Redback Networks

(RBAK)

said after the close that it would badly miss the Street's second-quarter earnings expectations because of continuing weakness in the global telecommunications market. It was off 16.3% to $9.47 in early action. Despite a smattering of good earnings news in recent weeks, the theme of preannouncement season has been overwhelmingly negative.

And adding to the bad news in its sector, chipmaker

Altera

(ALTR) - Get Report

said it was terminating 152 jobs, or about 7% of its workforce. It reiterated guidance that second-quarter sales will fall 25% sequentially from the first quarter. But the stock was lately trading up by 6% to $27.70.

"People are comfortable with valuations, overall," Cohen said. He added that he wouldn't be surprised if the market trended higher today. He said he expects volume to be light.

Trading was quiet ahead of the Fed decision yesterday. The market was divided about whether the monetary-policy body was going to cut rates by a half-point or quarter-point. After the Fed went for the smaller cut, the market appeared to shrug off any disappointment it may have had about the decision by attempting a slight rally in tech stocks. The Nasdaq closed up 10.1 points, or 0.5%, to 2074.7. The Dow ended down, however, off 37.6 points, or 0.4%, to 10,434.84. The S&P 500 also finished lower, by 5.7 points, or 0.5%, to 1211.1.

Yesterday's move by the

Federal Open Market Committee brings short-term interest rates to 3.75% -- their lowest level since 1994. In its statement announcing the rate cut, the Fed said the economy is still at risk for weakness, leaving open the possibility for more cuts.

Fed funds futures, a good proxy for how the bond market expects the Fed to act, are currently pricing in expectations that rates will be reduced by another 25 basis points at the Fed's next meeting, on Aug. 21.

In its statement yesterday, the Fed said "the associated easing of pressures on labor and product markets are expected to keep inflation contained." Tonight, Fed head

Alan Greenspan will alight the dais at the

Economy Club of Chicago

, giving a speech about the impact of energy on the economy. People will pay close attention to what he says about the inflationary aspect of rising energy prices in hopes of getting a read on his current line of economic thought.

The government reported this morning that though

initial jobless claims fell last week, the number of people on the unemployment roster continued to grow. Initial claims for the week ending June 23 fell by 16,000 to 388,000 from a revised 404,000 for the prior week. Economists had expected claims to rise to 412,000.

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