Dow hits four-month high

December 27, 2001 Posted: 2146 GMT

By Staff Writer Jake Ulick

NEW YORK (CNN/Money) -- U.S. stocks rose Thursday, sending the Dow Jones industrial average to a four-month high as investors looking beyond a year of losses bet on rebounding profits in 2002.

Earnings at the nation's biggest companies are expected to fall 21.6 percent in the current quarter, before dropping 6.2 percent in the first three months of 2002, according to research firm First Call.

But profits are seen rising by next spring during a year when economists expect the economy to grow once again.

"I think it's clear that the market is pretty optimistic about earnings next year," William Dudley, chief U.S. economist at Goldman, Sachs, told CNNfn's Street Sweep.

Shares of Advanced Micro Devices jumped after Merrill Lynch made positive comments on the chipmaker. And Yahoo! rose for a second day after agreeing to buy HotJobs.com.

The markets gains came amid an absence of economic news. The government postponed the release of weekly jobless claims data. No corporate financial reports are due until next Thursday. And trading volume, which set a record low for the year Monday, was light again Thursday, the second full trading session of the week.

Goldman, Sachs' Dudley frets that the strength of any recovery will be tempered by rising unemployment. Others worry that the market's three-month run has come too far, too fast.

"Are we in an overvalued situation?" Jim Waggoner, chief market strategist with Sands Brothers Asset Management, asked on CNNfn's Market Call. "I think we are, and we will probably have a day of reckoning in late January."

But no reckoning came Thursday. The Dow industrials gained 43.17 points, or 0.43 percent, to 10,131.31. The second straight gain lifted the Dow's fourth-quarter advance to 14.5 percent and handed the blue-chip index its best finish since Aug. 28, when it closed at 10,222.03.

The Nasdaq composite index rose 15.72, or 0.8 percent, to 1,976.42 and is up 32 percent over the past three months, while the Standard & Poor's 500 rose 7.76, or 0.7 percent, to 1,157.13.

On the New York Stock Exchange, winning stocks beat losing ones by a nearly 2-to-1 margin as 873 million shares traded. Nasdaq winners topped losers 3-to-2 as 1.2 billion shares changed hands.

In other markets, Treasury securities rose. The dollar continued rising against the yen but pulled back versus the euro.

Two to go

Two trading sessions separate investors from the end of a tough year. The Dow is down 6 percent in 2001. Tech stocks have fared worse, with the Nasdaq off 20 percent this year.

Both indexes, which fell last year, have not declined in unison for two straight years since 1974.

Still, shares of Advanced Micro Devices (AMD: up $0.50 to $16.12, Research, Estimates) rallied after Merrill Lynch narrowed its forecast for the chipmaker's fourth-quarter loss. Merrill expects 17 percent sequential sales growth, "entirely on the back of stronger microprocessor revenues."

Yahoo! (YHOO: up $0.26 to $17.77, Research, Estimates) agreed to buy HotJobs.com (HOTJ: down $0.30 to $10.37, Research, Estimates) for $10.50 per share, topping a bid from TMP Worldwide -- which operates the No. 1 job recruiting site, monster.com.

Microchip maker Atmel (ATML: up $0.87 to $7.49, Research, Estimates) also rose. A.G. Edwards upgraded the stock to "strong buy" from "buy."

In other gainers, Cardiac Science (DFIB: up $0.28 to $4.56, Research, Estimates) won a contract to provide its defibrillators in airports. Similarly, the U.S. Army awarded Stewart and Stevenson (SSSS: up $2.78 to $19.94, Research, Estimates) a $374 million contract to build trucks and trailers.

United Auto Group (UAG: up $3.05 to $26.20, Research, Estimates), an auto dealer, said it expects to top forecasts for the fourth quarter on growth in sales at stores open at least year.

The release of jobless claims Friday only makes for a busier session for economic data. Friday also brings November durable goods, December consumer confidence and home sales figures, also for December.

Elsewhere, Bush administration officials dismissed the latest Osama bin Laden tape as terrorist propaganda. Meanwhile, tensions continued between nuclear-armed India and Pakistan, the latest sign of global instability.

Saudi Arabia said OPEC will cut its output by 1.5 million barrels a day in a move to lift oil prices, which have slumped with the world economy. Shares of the biggest oil producer, Exxon-Mobil (XOM: up $0.19 to $39.79, Research, Estimates), continued their week-long run.

Stocks rose Wednesday after Wal-Mart and Yahoo! offered upbeat news about holiday sales. But the major indexes, which surged in October and November, have seen those gains slow in December amid a steady stream of profit warnings.

More disappointments are expected next week as companies wrap up a tough fourth quarter. A record-long economic expansion ground to a halt last summer and unemployment rose to a six-year high in November.

But the economy may be bottoming under the Federal Reserve's 11  interest rate cuts this year. The number of Americans filling for first-time jobless claims has fallen for three straight weeks. Consumer confidence has climbed from its September lows.

Thursday's market gains comes ahead of January, a traditionally strong month for stocks, when year-end bonuses and the end of tax-loss selling can lift markets. But bonuses, among those receiving them, fell this year. And with the market down for a second year, investors have fewer capital gains to offset with losses.

---

Click here to send mail to Jake Ulick

Search

CNN.com CNNSI.com CNNfn.com The Web