Nasdaq Has Best Close in a Year - TheStreet

Nasdaq Has Best Close in a Year

The Dow has a triple-digit gain as a Microsoft upgrade and PeopleSoft's guidance coax buyers.
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Updated from 4:07 p.m. EDT

An upgrade of

Microsoft

(MSFT) - Get Report

and unexpectedly strong guidance from

PeopleSoft

(PSFT)

lifted the

Nasdaq

to its highest close in over 13 months Thursday and helped spark a triple-digit gain on the

Dow

.

The Dow Jones Industrial Average closed up 101.89 points, or 1.1%, to 9142.84, ending at its session high. The Nasdaq rose 38.64 points, or 2.4%, to 1678.77, while the

S&P 500

was up 11.44 points, or 1.2%, at 993.76. The last time the Nasdaq closed higher was on May 23, 2002, when it ended at 1697.63.

Markets were in positive territory the entire session, getting an early spark after Merrill Lynch upgraded Microsoft to buy from neutral and added the software giant to its "Focus One" list. Merrill also raised its 2004 profit forecast for Microsoft and said the company could potentially increase its dividend payout. Shares rose 73 cents, or 2.8%, to $26.88, helping boost the Dow.

In a separate note, Merrill added

Wal-Mart

(WMT) - Get Report

to its list of favored stocks. Shares of the world's largest retailer rose $1.33, or 2.5%, to $55.68.

"The upgrades definitely helped us add on to yesterday's upswing, but things should probably slow down later today and with the half-day tomorrow," said Giri Cherukuri, head trader at OakBrook Investments. "Along with the factory orders, I'd say that's why we're up today, but we'll have more of the same up-and-down action."

PeopleSoft surprised nearly everyone by saying second-quarter earnings, revenue and license sales will all top estimates -- estimates that have been coming down across the board because of

Oracle's

(ORCL) - Get Report

hostile takeover bid. The news came one day after a hearing on PeopleSoft's "poison-pill" anti-takeover defense was indefinitely postponed in Delaware Chancery Court. Reversing early losses, PeopleSoft gained 19 cents, or 1.1%, to $17.98. Oracle gained 12 cents, or 1%, to $12.45.

"

With the PeopleSoft and Oracle thing going on,

it will be very interesting to see how many people will tender their shares and let Oracle buy PeopleSoft. We have to give our decision today on whether to sell. PeopleSoft is at $17.75 and Oracle is offering to buy at $19.50. That's a 10% premium," said Cherukuri, who added that he was leaning toward tendering shares.

Positive economic news, released just after the bell, added fuel to the morning's upside move, which comes on light volume in a holiday-shortened week. Factory orders for May showed 0.4% growth, which is better than the zero-growth forecast from Wall Street.

On the corporate front,

AT&T Wireless

(AWE)

plans to cut 1,000 jobs, or 3% of its workforce, this year in an effort to reduce costs,

The Wall Street Journal

reported. Shares in AT&T Wireless were unchanged at $8.51.

Meanwhile, after the close Tuesday, coffee-shop operator

Starbucks

(SBUX) - Get Report

reported a better-than-expected 10% rise in same-store sales in June, the best results in seven months. Shares rose $1.64, or 6.5%, to $26.97.

InterMune

(ITMN)

shares rose $1.08, or 6.8%, to $16.98 after Banc of America upgraded the biotech outfit to buy from hold, telling investors that a new CEO should restore credibility with Wall Street. Furthermore, the research note said that InterMune could be primed for a sale, with board member Warburg Pincus selling other biotech holdings in recent months.

In biotech earnings news,

Biomet

(BMET)

reported fourth-quarter earnings that were in line with analysts' expectations, on $377.2 million in revenue, up nearly 16% from the year-ago quarter. The company also became the latest to join the quarterly dividend club, announcing a cash dividend of 15 cents a share. Biomet fell 36 cents, or 1.3%, to $28.36.

Elsewhere in the biotech and drug sector,

Baxter

(BAX) - Get Report

fell 57 cents, or 2.2%, to $25.01 after the company said second-quarter earning per share would come in below Wall Street estimates and revised its 2003 guidance to reflect slower growth in its biotechnology business.

Also in tech, J.P. Morgan lowered its rating on chip-equipment maker

Novellus

(NVLS)

to underweight from neutral. Novellus shares were down 47 cents, or 1.3%, to $36.14

EarthLink

(ELNK)

shares sank 20 cents, or 2.6%, to $7.44 after CIBC downgraded the company to sector outperform from buy, on valuation concerns. The brokerage also cut its earnings estimates because of the price war unfolding among DSL providers.

Pfizer's

(PFE) - Get Report

Viagra might soon have to compete against the experimental impotence drug Cialis, which is produced by drugmakers

Eli Lilly

(LLY) - Get Report

and

Icos

(ICOS)

. The Food and Drug Administration will accept as complete the companies' application for the treatment, which is already sold in Europe and is seeking U.S. approval. Icos shares moved higher on the news, jumping $1.82, or 4.8%, to $39.56, while Lilly fell 28 cents, or 0.4%, to $69.50. Pfizer gained 7 cents, or 0.2%, to $34.60.

bebe stores

(BEBE)

, a retailer of women's apparel, was upgraded to neutral from underweight by J.P. Morgan, which also raised 2003 and 2004 earnings estimates above Wall Street consensus. bebe shares rose 27 cents, or 1.3%, to $20.37.

AMR

(AMR)

shares dropped 55 cents, or 5.2%, to $10.05 after

The Wall Street Journal

reported that its American Airlines unit is weighing a decision to hack away at operations, closing reservation centers and airport facilities. The rest of the airline industry followed suit, with the Amex Airlines Index off 1.2%.

PF Chang's

(PFCB)

, the highflying Chinese food chain, announced that second-quarter revenue jumped 34%, coming in at $136.6 million, more than $3 million better than analysts' expectations. Shares rose 33 cents, or 0.7%, to $49.08.

Overseas markets were higher following Tuesday's strong stateside finish, with London's FTSE 100 closing up 1.1% at 4007 and Germany's Xetra DAX ending up 3% to 3241. In Asia, Japan's Nikkei surged 3.4% to 9592, while Hong Kong's Hang Seng rose 0.3% to 9602.

The optimism this morning follows a day of gains for the markets. The Dow Jones Industrial Average closed up 55.51 points, or 0.6%, to 9040.95 Tuesday. The Nasdaq Composite gained 17.26 points, or 1.1%, to 1640.06, while the S&P 500 added 7.81 points, or 0.8%, to 982.31.