Today's Market: Dow the Day's Big Winner, Nasdaq Also Higher

<LI>Earnings season looms.</LI> <LI>Johnson & Johnson, Hewlett-Packard bolster Dow.</LI>
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Updated from 4:05 p.m. EDT

Betting that the

Federal Open Market Committee will leave rates alone at its meeting over the next two days, investors indulged in a pre-decision rally.

Blue-chips led the way as the

Dow Jones Industrial Average

benefited from good news in a number of its components, ending the session up 138.24, or 1.3%, to 10,542.99. Consumer products giant

Johnson & Johnson

(JNJ) - Get Report

was a big contributor, rising 6.1% after

PaineWebber

upgraded the stock and added it to its list of highlighted stocks.

Financial stocks including

American Express

(AXP) - Get Report

and

Citigroup

(C) - Get Report

were also a big part of the gains. The

American Stock Exchange Broker/Dealer Index

rose 1.9%.

"It's a relatively quiet day on the volume, but the realization is that the Fed is not going to act," said Dan Ament, associate vice president and investment executive at

Dain Rauscher

in Minneapolis. "This is not a big day by any means, but there is some money coming off the sidelines. And we could have an interesting few days given that this is the end of the quarter and we could see some window dressing," he said.

Hewlett-Packard

(HWP)

rose 2.4% on what seemed to be general enthusiasm for boxmakers.

PC Expo

is being held this week in New York.

Also on the move in the Old Economy were

Corning

(GLW) - Get Report

and industrial conglomerate

Tyco

(TYC)

. Corning soared 20 3/16, or 8.4%, to 260 3/16 after news it won a supply deal worth more than $1 billion.

Tyco tacked on 5 5/8, or 13%, to 48 7/8 after it said it amended earnings-per-share for 1999 and the first quarter of 2000 following a

Securities and Exchange Commission

review

Elsewhere, the

Nasdaq Composite Index

was overshadowed by the focus on Old Economy stocks, though it did sport a decent gain of 66.69, or 1.7%, to end the day at 3912.03. The

S&P 500

rose 13.83, or 1%, to 1455.31. The small-cap

Russell 2000

rose 5.95, or 1.2%, to 516.36.

TheStreet.com Internet Sector

Index did not follow the Nasdaq's modest lead. It lost 19.09, or 2.3%, to 818.77.

Market observers agreed that today's action looked like many investors were moving preemptively on the Fed's decision, or that they are only just now cottoning on to the fact that it is extremely unlikely the central bankers will do anything other than leave rates on hold.

"It's just an excuse to rally -- even though the market doesn't expect the Fed to hike," concluded

Miller Tabak

equity strategist Peter Boockvar.

Earnings Season Right Around the Corner

Boockvar suspects the Fed's likely inaction will give the market a few days worth of rally. Once Wednesday passes, and the decision is over and done with, he expects the focus will shift to corporate profits -- or the lack thereof.

"We focus on earnings, we focus on potential pre-announcements and we focus on whether the slower economy has had an effect," he said.

There is some concern on that front. Earnings tracker

I/B/E/S

has noted that, over the past two weeks, more analysts have lowered earnings estimates on the year than raised them. Moreover, a number of strategists and economists have expressed frustration with many company analysts' refusal to cut earnings estimates. They say analysts are expecting the economic status quo to remain unchanged when they should be more carefully considering the effect of a slowing economy on the companies they follow.

We're definitely seeing the results of the Fed intervention, said Ament, adding that the market now has to think about the sustainability of corporate profits.

Market Internals

Breadth was positive on both exchanges on moderate volume.

New York Stock Exchange: 1,479 advancers, 1,346 decliners, 887 million shares. 41 new 52-week highs, 56 new lows.

Nasdaq Stock Market: 2,129 advancers, 1,873 decliners, 1.3 billion shares. 68 new highs, 95 new lows.

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Most Active Stocks

NYSE Most Actives

  • Motorola (MOT) : 32.4 million shares.
  • AT&T (T) - Get Report: 25.5 million shares.
  • Philip Morris (MO) - Get Report: 20.4 million shares.

Nasdaq Most Actives

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Sector Watch

Tobacco stocks were strong.

Philip Morris

(MO) - Get Report

said Sunday that it had reached an agreement to acquire

Nabisco Holdings

(NA)

, and that after the deal concluded it would spin off its Kraft division. Philip Morris was up 15.5%, and Nabisco was up 2.2%.

Separately,

R.J. Reynolds Tobacco

(RJR)

agreed to buy

Nabisco Group Holdings

(NGH)

. RJR was up 5.6%, and Nabisco Group was up 3.7%.

The

Amex Tobacco Index

was up 3%..

U.S. and European scientists announced today that they've finished a draft of the map of the human genetic code. The

Amex Biotechnology Index

ended up 3% after some mid-session wavering

Celera Genomics

(CRA)

, which led the research with U.K-based

Wellcome Trust's Sanger Center

, fell 11.8%.

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Bonds/Economy

The Treasury market is modestly higher, as favorable supply conditions are trumping stronger-than-expected data on

existing home sales

.

Existing home sales rose 4.3% in May to 5.09 million. Economists polled by

Reuters

had forecast they would be unchanged at 4.88 million, on average. Home sales quickened in spite of the fact that mortgage rates soared to a five-year high in May. Those rates have since retreated.

President Bill Clinton

today announced a substantial upward revision to the projected federal budget surplus for the year, from $167 billion to $211 billion. Together with larger projected surpluses in future years, that will allow the federal government to pay down its debt by buying back all outstanding Treasury securities by 2012, Clinton said. The last time budget projections were revised, in February, the White House said the paydown could be completed by 2013.

However, many bond market participants are

skeptical a full paydown of Treasury debt will ever come to pass. It's not possible to accurately forecast economic and political developments so far into the future, they say.

The benchmark 10-year Treasury note rose 18/32 to 102 26/32, its yield at 6.109%.

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International

European markets were higher.

London's

FTSE

finished up 13.7 to 6405.2. Finance shares led, while Internet stocks dropped -- particularly

Freeserve

(FREE)

. The company posted poor fourth-quarter numbers and said it has so far failed to find a buyer.

Volume was thin, as many investors were more focused on

Wimbledon

than the ups and downs of the market. And they only just got back from

Ascot

.

The Paris

CAC

closed up 40.91 or 0.6%, to 6586.26, while Frankfurt's

Xetra Dax

gained 46.78, or 0.7%, to 7027.19.

The euro was at .9363 against the dollar.

Asian markets were mixed overnight after the Nasdaq's fall Friday and ahead of the upcoming Fed meeting.

Japanese markets did not stray far from Friday's close, and the

Nikkei

index fell 37.81 points to 16,925.40.

The dollar traded at 105.64 against the yen.

Hong Kong's

Hang Seng

index gained 240.83 points, or 1.5%, to 15,978.91 in low volume, largely swayed by moves in index heavyweights

Elsewhere in Asia, Korea's

Kopsi

index gained 12.61, or 1.6%, to 791.55, while Taiwan's

TWSE

index lost 155.37, or 1.8%, to 8529.56.

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