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Nasdaq jumps 3.6 percent

June 5, 2001
Web posted at: 2109 GMT

By Staff Writer Jake Ulick

NEW YORK (CNNfn) -- U.S. stocks rose for a fourth straight session Tuesday after a handful of technology companies signaled that the worst news about slowing profits may be over.

Technology shares, which have suffered the biggest losses during the last 15 months, posted the largest gains, handing the Nasdaq composite index a 3.6 percent advance.

But other sectors joined in. The Dow Jones industrial rose more than 100 points, helped by gains in retail, energy and drugs stocks.

Elizabeth Mackey, chief investment strategist at Bear Stearns, said the market's tone has changed since the Federal Reserve surprised investors with an inter-meeting interest rate cut on April 18.

"Every time we get a setback it's viewed as a buying opportunity," Mackey, told CNNfn's Street Sweep.

Lucent Technologies and Xilinx helped spark some of the buying after saying they would meet financial targets, countering for a day the stream of corporate profit warnings. Comverse Technology, which makes telecommunications software, said its profit in the latest quarter rose above expectations.

"There are certain areas that seem to be giving a little better story, not a great story, but stabilization," Ned Riley, chief investment strategist at State Street Global Advisors, told CNNfn's Market Call.

The Nasdaq composite index rose 77.73 points, or 3.6 percent, to 2,233.66 while the Dow Jones industrial average climbed 114.32, or 1 percent, to 11,175.84. The S&P 500 gained 16.45, or 1.3 percent, to 1,283.56.

"Every day that goes by (the market's lows of April and March) seem more and more like the true bottom," said David Briggs, head of equity trading at Federated Investors.

But the day's gains were not enough to reverse losses of late last month, when worries about economic weakness drove investors away from stocks. Briggs believes those issues won't go away just yet.

"We think the market's at the upper end of its range and it's not going to move much higher over the short term," he said. "I don't see the market making any sustained moves until we start to see some earnings visibility."

In the latest sign of weakness, economic data from the government showed falling worker productivity and factory orders. But investors Tuesday appeared to look beyond any bad news to a time when the Federal Reserve's five interest rate cuts this year will boost growth.

More stocks rose than fell. Advancing issues on the New York Stock Exchange beat declining ones 1,990 to 1,094 as 1.1 billion shares changed hands. Nasdaq winners topped losers 2,477 to 1,362. More than 1.7 billion shares traded.

In other markets, the dollar rose against the yen and edged lower versus the euro. Treasury securities advanced.

Pleasant surprise

A handful of companies offered promising business outlooks.

Xilinx (XLNX: up $4.02 to $45.61, Research, Estimates), a specialty chipmaker, said sales targets for its fourth quarter remain unchanged and order cancellations are falling.

Similarly, Lucent Technologies (LU: up $0.49 to $8.49, Research, Estimates) reaffirmed its financial guidance for the current quarter while Amazon.com (AMZN: down $0.47 to $16.44, Research, Estimates) said it remains on track for its first profits, defying the trend of disappointing news from corporate warnings.

That trend had continued Monday, when Cypress Semiconductor (CY: up $1.23 to $23.10, Research, Estimates) said second-quarter earnings will miss Wall Street estimates, just a week after workstation maker Sun Microsystems (SUNW: up $0.94 to $17.02, Research, Estimates) issued a warning of its own.

But those disappointments faded for a day. Comverse Technology (CMVT: up $8.86 to $67.52, Research, Estimates), which makes telecommunications software, said its fiscal first-quarter earnings gained 40 percent, topping estimates.

Other tech stocks rose, including Cisco Systems (CSCO: up $1.81 to $21.54, Research, Estimates), Juniper Networks (JNPR: up $2.14 to $46.58, Research, Estimates) and Oracle (ORCL: up $0.70 to $16.76, Research, Estimates).

Among other gainers, Boeing (BA: up $0.90 to $66.93, Research, Estimates) won a $1.49 billion contract to modernize the U.S. Air Force's military cargo planes, beating out Lockheed Martin (LMT: up $0.35 to $38.70, Research, Estimates) and Raytheon (RTN: up $0.10 to $29.25, Research, Estimates).

The Dow's gainer's included IBM (IBM: up $3.33 to $116.97, Research, Estimates), Johnson & Johnson (JNJ: up $2.05 to $102.19, Research, Estimates) and Home Depot (HD: up $0.35 to $50.35, Research, Estimates).

Not all companies offered good news. Shares of California Pizza Kitchen (CPKI: down $0.89 to $21.24, Research, Estimates) fell as much as 15 percent after the restaurant chain said it expects second-quarter earnings to miss expectations.

OPEC ministers, meeting in Vienna, Austria, made no changes in crude production quotas. Oil futures, which rose modestly Monday, added 11 cents to $28.24 a barrel Tuesday. Energy stocks have been among the biggest gainers this year, helped by rising profits.

Exxon Mobil (XOM: up $0.72 to $91.55, Research, Estimates), the world's biggest energy producer, earned more than $5 billion in the first quarter, a 51 percent gain from the year-ago period

Click here for CNNfn's commodities quotes

Still, the latest news on the economy continued to show weakness.

Factory orders fell a larger-than expected 3 percent in April, the government said. Earlier, the Labor Department said worker productivity fell at a revised 1.2 percent annual rate in the first quarter. The first decline worker output in six years mirrors the slowdown in the economy.

But economists expect this year's five Federal Reserve interest rate cuts, and a possible further reduction June 27, to help turn the economy around in the months ahead.

"With increasing vigor, the lagged effects of the Fed's interest rate cuts should begin to appear before the end of the summer," said Tony Crescenzi of Miller Tabak & Co.

Tuesday's fourth day of gains come with a caveat. After falling nearly 40 percent last year, the Nasdaq is still off another 10 percent in 2001.

Blue chips have held up better. Up 3.4 percent this year, the Dow is only 4.6 percent below last year's all-time high.

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