Wall St. awaits Santa

December 18, 2001 Posted: 2202 GMT

By Staff Writer Alexandra Twin

NEW YORK (CNN/Money) -- Wall St. rallied for the third session in a row Tuesday as investors moved into traditional blue chip and select tech issues after General Electric issued a positive forecast, seeming to give credence to hopes that the corporate profit recovery is not far off. 

Outside the corporate sector, investors also cheered a government survey that showed housing starts and permits for new home construction in the United States rose last month. The results surpassed expectations, showing continued strength in the resilient housing market.

"People want to focus more on the blue chips because they figure that's what will do well through the end of the year," Patrick Boyle, head financial trader, Credit Suisse First Boston, told CNNfn's Street Sweep. "But there are still people waiting on the sidelines looking to fill other positions, so we should continue to rise through the end of the year."

The Dow Jones industrial average gained 106.42 to 9,998.39. The last time the Dow Industrials closed above 10,000 was on December 7 when it closed at 10,049.46. 

The Nasdaq composite index rose 17.31 to 2,004.76. The Standard & Poor's 500 added 8.56 to 1,142.92.

Although late December rallies are common, analysts cautioned that the finicky nature of the day's trade should not be dismissed.

"We've got to decide whether this is a real rally or a bounce-back response. Right now, the jury's still out," Arthur Cashin, director of floor trading at UBS PaineWebber told CNNfn's Halftime Report.

Asian stocks finished mostly higher Tuesday, while European bourses closed mixed.

Treasury prices rose modestly, pushing the 10-year note yield down to 5.14 percent from 5.24 percent late Monday. The dollar gained modestly against the euro and the yen. Light crude oil futures rose 18 cents to $19.70 a barrel in New York.

Market breadth was positive. On the New York Stock Exchange, five issues rose for every three that fell as 1.32 billion shares traded. On the Nasdaq, advancers beat decliners 4-to-3 as almost 1.85 billion shares changed hands.

After the close of trade integrated aluminum company and Dow component Alcoa (AA: up $1.15 to $37.66, Research, Estimates) issued a quarterly results warning, saying it expects to earn 10 cents a share in its fourth quarter, sorely missing current estimates of earnings of 30 cents a share.

Looking ahead, Wednesday brings quarterly results from a few companies prior to the open.

Air courier FedEx (FDX: up $1.84 to $50.80, Research, Estimates) is expected to have earned 64 cents a share in its second quarter, a 4 percent decline from the 67 cents a share earned one year ago.

Financial services company Morgan Stanley (MWD: up $1.87 to $53.56, Research, Estimates) is expected to have earned 67 cents a share in its fourth-quarter, a 36 percent decline from the $1.06 earned one year earlier.

Old school names rule

GE, the diversified conglomerate whose operations range from financial services to television, said it is on target to meet Wall Street's 2001 guidance and will surpass current 2002 estimates.

In addition to its forecast, GE's (GE: up $1.42 to $39.72, Research, Estimates) Industrial Systems division said it would buy Interlogix (ILXI: up $9.92 to $38.63, Research, Estimates), an electronic security company, for $777 million in cash and stock. The company also announced it will cut another 3,000 jobs, bringing its 2001 workforce reductions to 22,000.

"The GE news was good, so maybe that gave investors some confidence today (Tuesday)," said Brett Gallagher, head of U.S. equities at Julius Baer. "Liquidity is very strong right now. Individual investors and portfolio fund managers don't want to be on the sidelines now. We're going to glide into the year end."

Along with GE, big-cap traditional names in the pharmaceutical, energy and drug sectors were among the big winners, while a broad range of technology shares -- including software and networking issues -- helped the Nasdaq.

Credit Suisse First Boston reiterated its "buy" rating on construction firm and Dow component Caterpillar (CAT: up $1.46 to $51.36, Research, Estimates).

Merrill Lynch upgraded Dow component DuPont (DD: up $1.10 to $43.22, Research, Estimates)  to "strong buy" from "buy," saying that it expects the chemical company to increase industrial production by the second quarter of 2002 and that now is the time to buy the stock.

On Monday, pharmaceutical company Pfizer (PFE: up $0.31 to $40.64, Research, Estimates) said it was comfortable with its previously stated 2002 guidance, which narrowly misses analysts' estimates.

Retailers Best Buy (BBY: up $3.55 to $72.55, Research, Estimates) and Circuit City (CC: up $0.16 to $23.86, Research, Estimates) both posted improved quarterly results from the same period one year earlier.

J.P. Morgan upgraded USA Networks (USAI: up $1.84 to $26.86, Research, Estimates) to "buy" from "long-term buy" and raised its price target to $32 from $25. On Monday, the media conglomerate announced the sale of its entertainment assets to Vivendi Universal (V: up $1.37 to $53.47, Research, Estimates).

Business software maker Siebel Systems (SEBL: up $3.74 to $30.94, Research, Estimates) got a vote of confidence from Banc of America Securities. The brokerage said Siebel's quarter closed strongly on Dec. 15.

Video game publisher Take Two Interactive Software (TTWO: up $1.95 to $15.51, Research, Estimates) was unusually active after the company said that its fiscal first-quarter will top estimates, although the fourth-quarter will miss. A number of brokerages chimed in with favorable comments following the forecast.

Online discount retailer Priceline.com (PCLN: up $0.69 to $6.26, Research, Estimates) signed a new marketing deal with AOL Time Warner (AOL: down $0.80 to $32.75, Research, Estimates).

One of Monday's stars, Amgen (AMGN: down $1.10 to $58.39, Research, Estimates), got its wings clipped by J.P. Morgan and Deutsche Bank Alex. Brown, which both downgraded the biotechnology company. Amgen announced Monday that it has agreed to buy rival Immunex (IMNX: down $0.43 to $28.63, Research, Estimates) for $16 billion.

Micron Technology (MU: up $1.11 to $31.81, Research, Estimates) was active ahead of its quarterly results due out after the bell Tuesday. The chipmaker is expected to report a first-quarter loss of 38 cents per share, compared to the 59-cent-a-share gain in the same period one year earlier. The company was also active on news that it is buying one of Toshiba's memory chip businesses.

No. 1 contract electronics manufacturer Solectron (SLR: down $2.71 to $12.10, Research, Estimates) reported a fiscal first-quarter loss and said it was cautious looking forward.

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