Displaying considerable institutional and intestinal fortitude, investors shrugged off mixed earnings-related data today and pushed stocks higher today, concentrating on the technology sector, supported by one of the day's strongest earnings releases,
The networking, fiber optics and semiconductor sectors were the day's strongest, helping the
Nasdaq Composite Index to a 64-point gain, a strong advance, though off the high. At one point, the Nasdaq was up nearly 140 points.
Meanwhile, breadth was strong on the
New York Stock Exchange, despite a lackluster performance for the
Dow Jones Industrial Average, which ended the day lower due to significant weakness in
, which didn't even come close to expectations in its earnings release. 3M lost 3%, and the Dow ended down 68 points.
But today's action shows investors aren't necessarily focused on earnings reports as a barometer of how the market should trade. The going sentiment is already shrugging off this quarter's earnings reports as things of the past; instead, the market is discounting the looser credit and the recovery in economic demand it anticipates six months down the line. Expected increases in demand for products certainly means technology, which explains how the market was able to ignore the multitude of analysts grousing about
after the company reported earnings post-close yesterday.
"I don't know if it's a bull yet, but the bear is starting to retreat," said Scott Curtis, trader at
, speaking about the Nasdaq. "It's a stealth bull."
After trading higher most of the day, the market became wary of Intel, which lost 88 cents to $30.05, or 2.8%, after the company reported earnings yesterday. The chipmaker beat earnings estimates by just one cent and said first-quarter revenue would be
weak. Analysts concentrated on Intel's promise to spend $7.5 billion in capital expenditures this year, ahead of last year's $6.7 billion rate, saying it was an unreasonable figure. Others said the company was losing market share to
Advanced Micro Devices
But for semiconductor stocks, it didn't matter today, as investors took the news of increased spending as gospel, using this and
earnings to rally semiconductor equipment stocks.
gained 8.6% and
(a chip/networking name) rose 14.7%. The
Philadelphia Stock Exchange Semiconductor Index
rose 6.3% today.
Overall, technology stocks have performed strongly since the Fed surprised with a rate cut at the beginning of the month. The market's strength today continues a general trend of selling defensive stocks and favoring the sectors with greater growth prospects than other sectors. Cyclical stocks haven't been part of the recent upswing, which suggests that investors in those stocks are being cautious about this recovery, eschewing growth-oriented names that take longer to rebound in terms of demand when compared to tech stocks.
"The way it looks is, we're in a recessionary environment," said Rob Cummisford, portfolio manager at
in Grand Rapids, Mich. "We're accepting that we've been in it. But the Fed's now on our side....There's a lot of people who don't want to miss it when
the economy finally does turn up."
Among other sectors that pleased investors were the networkers, thanks to Juniper Networks, which reported earnings following the close
Amex Networking Index
gained 4.7%, led by Juniper (up 6.5%) and
, which gained 8.8%.
In addition, telecommunications equipment maker
Applied Micro Circuits
gained 14.2% today, after reporting stronger-than-expected earnings.
The fact that Intel's cautious comments about the first quarter didn't deter investors from rallying other similar names shows that the market may have already discounted poor earnings performance for chip companies; but it leaves investors wondering whether the market is headed for a shock if some other technology company says it anticipates rough going in the coming months.
"I guess what's going to be tested is how much staying power this has," said Cummisford. "We could get some kind of negative-type announcement, like next quarter's earnings, earnings outlooks or economic news."
The economic news didn't hurt anybody today. The
Consumer Price Index showed a meager 0.1% gain in December for its core figure, which excludes food and energy prices. That was short of economists' expectations for a 0.2% gain. But more slowing could be in the cards -- the inventories-to-sales
ratio at businesses hit a 19-month high in November. Businesses build up inventories expecting a certain level of sales, and when those sales don't come through due to a slowing in the economy, companies are forced to slow production in order to work off excess inventories, which slows economic growth. This process is a continuing one. It could result in more weakness for at least the first quarter.
Economic slowing was confirmed by today's release of the Federal Reserve's
Beige Book, an anecdotal view of economic conditions around the country. The
release talked of slowed manufacturing activity in all areas of the country and a significant decline in retail and automobile sales.
Breadth was strong on heavy volume.
New York Stock Exchange: 1,591 advancers, 1,330 decliners, 1.3 billion shares. 168 new 52-week highs, 11 new lows.
Nasdaq Stock Market: 2,370 advancers, 1,600 decliners, 2.76 billion shares. 128 new highs, 19 new lows.
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Most Active Stocks
NYSE Most Actives
- Nortel Networks (NT) : 40 million shares.
General Electric (GE) - Get General Electric Company (GE) Report: 24 million shares.
Lucent Technologies (LU) : 22 million shares.
Nasdaq Most Actives
- Intel: 109.5 million shares.
Cisco (CSCO) - Get Cisco Systems, Inc. Report: 67.6 million shares.
WorldCom (WCOM) : 50.8 million shares.
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Consumer products companies, a traditional defensive sector, fell today after 3M's poor earnings results. The
Morgan Stanley Consumer Index
fell 1.4% today, led down by 3M and
Procter & Gamble
, which lost 1.9% today.
Bad news in the banking industry was putting pressure on financials. Yesterday,
Bank of America
lowered estimates and said that it expects higher loan losses in 2001. The banking sector got the added bonus of crummy earnings from
J.P. Morgan Chase
. The Philadelphia Stock Exchange/KBW Bank Index ended off 1%.
Crude oil prices slid today, pulling down related sectors. The
American Stock Exchange Oil & Gas Index
was down 1.7%, while the
Philadelphia Stock Exchange Oil Service Index
ended 4% lower. Oil prices, which were up yesterday in advance of OPEC's announced production cut, fell today after OPEC released more details of the plan. The oil-producing nations are expected to cut production by 1.5 million barrels a day.
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Treasuries ended higher today, as the markets digested a sizable amount of commercial data released this morning, with the pricing on the long bond especially strong. Although the latest information was mixed, the overall message remains unchanged from that of recent weeks: The weakening economy will need active support from the Federal Reserve.
The benchmark 10-year
Treasury note lately was up 14/32 to 104 9/32, yielding 5.175%.
In economic news, the
Consumer Price Index
), which measures the prices paid for goods and services, provided fresh evidence that a tepid inflation rate is not the problem.
The core CPI -- which measures the prices of goods and services excluding food and energy -- whose prices are volatile, rose 0.1% in December, below expectations of economists polled by
. The annual growth rate of the core CPI remained at 2.6%, its peak level of the year.
Consumer prices of all goods and services, including food and energy, rose 0.2% in December, while its annual rate of increase held steady at 3.4%.
Mortgage Applications Survey
) detected increases in refinancing and new mortgages, as mortgage interest rates remained low.
The refinancing index rose from 1572.1 to 2800.6, the highest it's been since October 1998. It has now almost doubled in value for two successive weeks. The purchase index rose to 332.9 from 292.8, continuing its upward trend of the last four weeks.
BTM-UBSW Weekly Chain Store Sales Index
chart) fell 0.3%, after rising for four consecutive weeks. Its change from the same period 12 months ago fell to 4.9% from 5.7%, but it remains relatively strong. The
Redbook Retail Average
chart) found this month's sales after two weeks running 2.6% ahead of December's. Sales in January rose by 3.6% compared to a year ago.
) fell 0.6% in December. That was slightly higher than economists' expectations of a 0.5% slide. It is the third consecutive decline and confirms yet again the cooling in the economy.
As production fell, the capacity utilization rate, which measures anti-inflationary slack in the industrial sector of the economy, fell to 80.6%, the lowest since September 1992.
) fell 0.4% in December after having remained unchanged during the previous month.
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European markets ended higher today.
soared 114.1 to 6197.4. Across the channel, Paris'
gained 122.4 to 5884.1, while Frankfurt's
ended up 150.5 to 6653.38
Asian markets were mixed overnight. Tokyo's key
index rose for a fourth straight session after hitting a 27-month low last Thursday. The index, led higher by banking shares, closed up 83.18, or 0.61%, to 13,667.63.
Losses in Chinese shares pressured the Hong Kong stock market lower Wednesday after Chinese Premier Zhu Rongji supported a crackdown on stock market manipulation. The key
index closed down 101.67, or 0.66%, to 15,261.48.
For more on world stock markets, check out
global indices information.
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