'Awesome' Microsoft Report Spurs 100-Point Nasdaq Gain

Microsoft helped move the Nasdaq to its third-best day yet.
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SAN FRANCISCO --

Microsoft

(MSFT) - Get Report

does have enemies -- both real and imagined (just because you're paranoid doesn't mean they're not out to get you, Bill). But the software giant found itself surrounded by "friends" today, as its better-than-expected earnings

last night induced some back-slapping and even a few high-fives on Wall Street.

The biggest market-cap company in the world rose 6.9%, helping the

S&P 500

gain 28.11, or 2.2%, to 1289.43 and the

Nasdaq Composite Index

surge 99.94, or 3.7%, to 2788.12. The point gain is the Comp's third largest in history.

Microsoft's comment about "awesome" PC demand assisted computer and component makers such as

Intel

(INTC) - Get Report

and

Gateway

(GTW)

. The

Nasdaq 100

rose 4.4%, the

Philadelphia Stock Exchange Box Maker Index

gained 5.3%, the

Morgan Stanley High Tech 35

rose 3.2%, and the

Philadelphia Stock Exchange Semiconductor Index

gained 2.5%.

The market: Join the discussion on

TSC

Message Boards.

IBM

(IBM) - Get Report

and

Hewlett-Packard

(HWP)

also rose in the wake of Microsoft's report. Big Blue was the biggest positive influence on the

Dow Jones Industrial Average

, which rose 187.43, or 1.8%, to 10,392.36.

After the close, IBM reported third-quarter earnings of 90 cents a share, in line with the 22-analyst estimate. IBM was halted down at 107 3/4 in after-hours trading,

CNBC

reported, following its New York session close of 112 3/4.

In other post-close action,

America Online

(AOL)

posted first-quarter profits of 15 cents a share vs. the 33-analyst estimate of 13 cents.

Ahead of those numbers, AOL rose 2.4%, helping

TheStreet.com Internet Sector Index

gain 30.08, or 4.4%, to 709.52. Additionally,

TheStreet.com

Red Hots index rose 8.49, or 4.2%, to 210.04. The 20-stock index tracks action in particularly volatile stocks and is meant to measure so-called hot money.

In addition to earnings developments, techs also got a boost from the bond market, which stemmed its recent bleeding. The price of the 30-year Treasury bond rose 4/32 to 96 6/32, its yield slipping to 6.34%.

The dollar, meanwhile, was aided by the August trade deficit report. At $24.1 billion, the deficit fell for the first time in four months, down from the record $25.5 billion in July and smaller than expectations. The dollar was quoted at 106.60 yen in late New York trading vs. 105.33 yesterday.

The rising dollar aided financial stocks, which also got a lift from strong earnings by big names such as

Chase

(CMB)

, which gained 6.6%. Elsewhere,

American Express

(AXP) - Get Report

rose 3.5% and was the Dow's second-leading influence. The

Philadelphia Stock Exchange/KBW Bank Index

rose 2.7%.

Transports were notable laggards to the day's fairly broad-based advance. The

Dow Jones Transportation Average

fell 51.77, or 1.8%, to 2808.44.

CNF Transportation

(CNF) - Get Report

, down 13.9%, was a big drag on the index.

The

Russell 2000

edged up 3.01, or 0.7%, to 413.94 as breadth improved from its recent ugliness.

In

New York Stock Exchange

trading, 926.4 million shares were exchanged while advancers led declining stocks 1,630 to 1,371. In

Nasdaq Stock Market

action 1.06 billion shares traded while gainers led 2,194 to 1,628. New 52-week lows outpaced new highs 307 to 20 on the Big Board and by 140 to 80 in over-the-counter trading.

"I think the best part of this rally is that at the end of the day, the bears are still bearish," said Jon Olesky, head of block trading at

Morgan Stanley Dean Witter

. "The overhangs the market is dealing with -- interest rates, the Fed, dollar-related and earnings-related -- are still out there. But I think people got to a point where they raised enough cash. We saw some of the bite come out of the sellside and the market lifted on that basis. I don't think buyers are feeling very bullish."

Maintaining that equilibrium is "the perfect way for the market to rally," Olesky continued. "We moved the S&P 28% and they're still not bullish."

IBM's inline report will present a "wrinkle" for the market tomorrow, but "you'll be surprised by the resolve of the market," the trader said. "I think near-term we've put in a bottom."

Over the River & Through the Woods?

Like Olesky, a growing number of traders are hopeful

Friday will prove the nadir of the recent decline, noting that the market dodged potential booby traps this week, notably the consumer price index report yesterday.

"It's possible,

but until you have the dark clouds of a weak bond market and weak currency removed, you're not going to have a significant move higher," countered Tony Dwyer chief equity strategist at

Kirlin Holdings

.

Dwyer, who recently joined Kirlin from

Ladenburg Thalmann

, was impressed by the performance of the dollar today but called the advance "an oversold trading rally." Looking ahead, "meaningful upside" will be difficult "until you fix the direction of bonds, which is not going to happen until at least the November meeting" of the

Federal Open Market Committee

, he said.

If the market continues to bounce, the strategist expects investors' "comfort level" will rise. When (and if) that mood becomes more prevalent, Dwyer sees the market getting "smacked down" again, with the Dow falling as low as 9700, with its upside limited to 10,600 in the short term.

But the strategist is far from bearish.

"In a nutshell, I think the market is going to be volatile," he said. "I don't see huge upside or downside. Earnings growth is going to support the market but the fact you have the Fed in a tightening mode is going to keep the multiple

expansion at bay."

Currently, just 24% of NYSE stocks are trading above their 200-day moving average vs. over 60% earlier in the year, Dywer noted. "Some stocks are down so much, you're seeing signs of bottoms. But they're having a hard time breaking out because you're not getting multiple expansion.

But long-term, I don't think inflation is a problem. Ultimately we'll bottom and make a sustainable move higher."

Among other indices, the

Dow Jones Utility Average

fell 0.42, or 0.1%, to 294.66; and the

American Stock Exchange Composite Index

added 10.51, or 1.4%, to 786.43.

Elsewhere in North American equities, the

Toronto Stock Exchange 300

rose 76.85, or 1.1%, to 6930.8 and the

Mexican Stock Exchange IPC Index

gained 71.91, or 1.4%, to 5122.39.

Wednesday's Company Report

By Eileen Kinsella
Staff Reporter

(

Earnings estimates from First Call/Thomson Financial; earnings reported on a diluted basis unless otherwise specified. New highs and lows on a closing basis unless otherwise specified.

)

Microsoft jumped 5 15/16, or 6.9%, to 92 1/4 after it reported better-than-expected earnings last night. The company reported first-quarter operating earnings of 38 cents a share, 4 cents ahead of the 27-analyst estimate.

TheStreet.com

wrote about Microsoft's earnings in a story

last night.

Earnings/revenue reports and previews

AMR

(AMR)

slipped 1/16 to 54 9/16 after it posted third-quarter earnings of $1.76 a share, better than the 12-analyst estimate of $1.69 a share but down from a year-ago $2.49

Bausch & Lomb

(BOL)

bounced up 3 3/16, or 5.8%, after it said it doesn't know the reason for its stock's swoon since posting earnings last week. The company said it's comfortable with the consensus estimate for earnings in 2000. The 11-analyst estimate calls for the company to earn $3.08 a share in 2000.

Bell Atlantic

(BEL)

slipped 1/8 to 63 13/16 after posting third-quarter earnings of 76 cents a share, in line with the 17-analyst estimate and up from the year-ago 69 cents.

BellSouth

(BLS)

inched up 15/16 to 43 9/16 after it reported third-quarter earnings of 51 cents a share, beating both the 16-analyst estimate of 50 cents and the year-ago 41 cents a share, which included a depreciation and amortization charge.

Borg-Warner

(BWA) - Get Report

fell 1 3/16 to 38 3/16 after it posted third-quarter earnings of $1.02 a share, in line with the eight-analyst estimate and up from the year-ago 73 cents.

Burlington Resources

(BR) - Get Report

inched up 7/16 to 37 1/4 after posting third-quarter earnings of 23 cents a share, a penny shy of the 27-analyst estimate. The company posted earnings of 8 cents a share in the year-ago period.

Chase jumped 4 11/16, or 6.6%, to 75 13/16 after it reported third-quarter earnings of $1.37 a share, a nickel ahead of the 20-analyst First Call consensus estimate and up from the year-ago 82 cents.

Capstead Mortgage

(CMO) - Get Report

was unchanged at 3 3/4 after it posted third-quarter earnings of 16 cents a share, in line with the two-analyst estimate and up from a year-ago loss of 28 cents.

Central and Southwest

(CSR)

was unchanged at 21 5/16 after posting third-quarter earnings of $1.04, beating the four-analyst expectation of $1.01, but lower than a year-ago $1.06.

Charter One

(COFI)

climbed 5/8 to 22 11/6 after it posted third-quarter earnings of 54 cents a share, in line with the 17-analyst estimate and up from the year-ago 45 cents.

Covad Communications

(COVD)

climbed 1/4 to 40 1/4 after it posted a third-quarter loss of 70 cents a share, narrower than the eight-analyst estimate of a 79-cent loss and the year-ago $1.84 loss.

Dime Bancorp

(DME)

edged up 5/16 to 16 5/8 after it posted third-quarter earnings of 55 cents a share, in line with the 13-analyst estimate but down from the year-ago 56 cents.

EMC

(EMC)

shed 4 15/16, or 7.1%, to 64 1/2 after reporting third-quarter earnings of 29 cents a share, 2 cents ahead of the 20-analyst estimate and up from the year-ago 19 cents.

Fleet Boston

(FLT) - Get Report

rose 7/16 to 38 after reporting third-quarter earnings of 74 cents a share, a penny ahead of the 11-analyst estimate and up from the year-ago 52 cents.

Fleming

(FLM) - Get Report

gained 1 7/8, or 19.7%, to 11 3/8 after posting third-quarter earnings of 27 cents a share excluding items. The lone-analyst estimate called for earnings of 11 cents a share, while year-ago earnings, excluding charges, were 2 cents a share.

Fort James

(FJ)

added 1 to 25 9/16 after it posted third-quarter earnings of 50 cents a share, 1 cent ahead of the 10-analyst estimate but down from the year-ago 66 cents.

General Dynamics

(GD) - Get Report

jumped 4 3/16, or 8%, to 56 7/16 after posting third-quarter earnings of 90 cents a share, a penny higher than the 12-analyst estimate and up from the year-ago 78 cents.

Harrah's Entertainment

(HET)

rose 1 1/8 to 27 13/16 after it reported third-quarter earnings of 58 cents a share, better than the 20-analyst estimate of 50 cents and the year-ago 44 cents.

Jostens

(JOS)

climbed 1/16 to 19 1/8 after reporting a third-quarter loss of 21 cents a share, narrower than the two-analyst estimate of a 22-cent loss but down from the year-ago loss of 20 cents.

Eli Lilly

(LLY) - Get Report

shed 4 1/4, or 6.1%, to 65 5/8 after it posted third-quarter earnings of 62 cents a share, in line with the 23-analyst estimate and up from the year-ago 46 cents.

Salomon Smith Barney

cut its rating of Lilly to neutral from buy.

Liz Claiborne

(LIZ)

rose 1 9/16 to 37 3/8 after it posted third-quarter earnings of $1.08 per share, beating both the 13-analyst estimate of $1.03 and the year-ago 96 cents.

MindSpring

(MSPG)

fell 7/8 to 25 13/16 after it posted third-quarter earnings of 5 cents a share, 2 cents ahead of the nine-analyst estimate, but down from the year-ago 9 cents.

Modine Manufacturing

(MODI)

rose 15/16 to 24 1/32 after it reported second-quarter earnings of 51 cents a share, below the single-analyst estimate of 56 cents and the year-ago 63 cents. The company said it would start buying back 300,000 shares as part of a larger share repurchase authorization.

Nabors Industries

(NBR) - Get Report

climbed 13/16 to 22 3/4 after it posted third-quarter earnings of 4 cents a share, below the 17-analyst estimate of 5 cents and the year-ago 27 cents.

Provident Bankshares

(PBKS)

fell 7/16 to 20 3/8 despite posting third-quarter earnings of 43 cents, beating the six-analyst estimate of 42 cents, and up from a year-ago 37 cents a share.

Republic New York

(RNB)

climbed 1/4 to 61 15/16 after posting third-quarter earnings of $1.15 per share, beating both the five-analyst estimate of 99 cents and the year-ago loss of 96 cents, which included a loss on a Russian investment.

Sabre Group

(TSG) - Get Report

lost 1 7/16 to 42 1/4 after it posted third-quarter earnings of 55 cents a share, a penny better than the five-analyst estimate and up from 48 cents a year ago.

Schering-Plough

(SGP)

rose 1 9/16 to 47 9/16 after it reported third-quarter earnings of 35 cents a share, in line with the 22-analyst estimate and up from the year-ago 29 cents.

J.P. Morgan

initiated coverage of the stock as with a buy rating.

Southdown

(SDW)

fell 4 3/16, or 8%, to 48 3/8 after it posted third-quarter earnings of $1.78 per share, missing the six-analyst estimate of $1.84 but up from the year-ago $1.70 a share.

SouthTrust

(SOTR)

climbed 1/2 to 36 21/32 after posting third-quarter earnings of 67 cents a share, a penny better than the 21-analyst estimate and up from a year-ago 57 cents.

Tellabs

(TLAB)

jumped 3 5/8, or 6.5%, to 59 1/16 after it reported third-quarter earnings of 34 cents a share, a penny better than the 29-analyst estimate and up from the year-ago 23 cents.

Viacom

(VIA) - Get Report

rose 7/16 to 41 1/8 after saying it is scuttling, for now, its plan to split off its

Blockbuster

(BBI) - Get Report

video-rental chain because of the poor performance of Blockbuster's stock and Viacom's proposed acquisition of

CBS

(CBS) - Get Report

,

The Wall Street Journal

reported. Shares of Blockbuster fell 1 1/16, or7.3%, to 13 9/16.

Separately, Blockbuster posted third-quarter earnings of 14 cents a share, a penny better than the eight-analyst estimate and matching the year-ago report.

Offerings and stock actions

BSquare

(BSQR) - Get Report

jumped 10 11/16, or 71.2%, to 25 5/8 in its trading debut.

Credit Suisse First Boston

priced the 4 million-share IPO at $15.

Crossroads

(CRDS)

soared 61 1/2, or 342.6%, to 78 in its first day of trading.

SG Cowen

priced the 3.75 million-share IPO at $18.

Charlotte Russe

(CHIC) - Get Report

gained 7/8, or 7.9%, to 11 7/8 in its trading debut.

Robertson Stephens

priced the 2.9 million-share IPO at $11.

ZapMe!

(IZAP)

fell 1 1/2, or 13.6%, to 9 1/2 in its first day of trading. Merrill Lynch priced the 9 million-share IPO at $11.

Analyst actions

SG Cowen

upped its fiscal 1999 estimates on

BroadVision

(BVSN) - Get Report

to 56 cents a share from 51 cents and its fiscal 2000 estimates to 67 cents a share from 62 cents. Shares of BroadVision leaped 23 13/16, or 15%, to 181 3/4.

Robertson Stephens

initiated coverage of

AES

(AES) - Get Report

with a buy rating. AES mounted 1 7/8 to 54 5/8.

Merrill Lynch

sliced its intermediate-term rating on

Bristol-Myers Squibb

(BMY) - Get Report

to accumulate from buy. Bristol-Myers stumbled 5/16 to 75 13/16.

First Albany

upped its rating on

Computer Associates

(CA) - Get Report

to accumulate from neutral. Computer Associates bounced 3 3/4, or 6.8%, to 58 1/4.

Robertson Stephens rolled out coverage of

Dynegy

(DYN)

with a buy rating. Dynegy climbed 3/16 to 21 1/2.

Credit Suisse First Boston

cut its rating on

Hormel Foods

(HRL) - Get Report

to hold from buy. Hormel slipped 1 7/16 to 43 5/8.

Morgan Stanley Dean Witter

cut its rating on

PG&E

(PCG) - Get Report

to outperform from strong buy. PG&E skidded 15/16 to 22 3/16.

Lehman raised its price target on

RealNetworks

(RNWK) - Get Report

to 130 from 120. RealNetworks lost 2 15/16 to 100 7/16.

J.P. Morgan sliced its rating on

ServiceMaster

(SVM) - Get Report

to long-term buy from buy. ServiceMaster tumbled 1 1/16, or 7.65, to 12 13/16.

Warburg Dillon Read

raised its rating on

Telemex

(TMX)

to strong buy from hold. Telemex shares hopped 1 to 77.

Merrill added

Tyco International

(TYC)

to its Focus One list as the top pick in its multi-industry category. Tyco advanced 3 7/8 to 88 3/8.

TSC

wrote about the recent controversy swirling around Tyco in a

story last week.

Merrill upgraded

United Technologies

to long-term buy. Shares of United Technologies gained 2 3/8 to 56.

Miscellany

CTS

(CTS) - Get Report

said it cannot explain the recent price decline in its stock. At the close, the stock fell 3 15/16, or 7.8%, to 46, after dipping as low as 39. Chairman, president and CEO Joseph Walker said, "CTS is not aware of any development applicable to its business or prospects that adversely affects its outlook."

In a blow to tobacco companies, a state appeals court in Florida refused to shelter U.S. tobacco companies from punitive damages in a follow-up trial to last July's expansive liability verdict for up to one million sick smokers. The ruling knocked down arguments by

Philip Morris

(MO) - Get Report

and other defendants in the suit, that potentially hundreds of billions of dollars in punitive damages be fixed through individual trials. It also sets the stage for a potentially massive award against the tobacco companies by the end of the year. Shares of Philip Morris sank 3 11/16, or 11.9%, to 27 1/16.