Nasdaq eyes another gain

January 7, 2002 Posted: 1349 GMT

NEW YORK (CNN/Money) -- The Nasdaq composite index looked set to build on a three-day advance early Monday as investors continue betting that technology stocks will benefit from any recovery in the U.S. economy.

But stocks, which have not fallen in 2002, will face a test if a profits and spending rebound does not materialize.

Nasdaq 100 futures rose early Monday, pointing to a higher open. Standard & Poor's 500 futures were little changed.

The session's pre-market gainers including JDS Uniphase (JDSU: Research, Estimates), Dell Computer (DELL: Research, Estimates) and Microsoft (MSFT: down $0.33 to $68.90, Research, Estimates), all of which rallied last week.

In corporate news, AOL Time Warner (AOL: Research, Estimates) is expected to revise its earnings guidance at the end of the day and Lucent Technologies has a new CEO. Microsoft has a scheduled court hearing and Enron Corp. (ENE: Research, Estimates) has a bankruptcy hearing.

Driven partly by encouraging signs that the U.S. recession may be near an end, the Dow Jones industrial average jumped 2.4 percent during the first three trading days of the year to close at 10,259.74 Friday. The Nasdaq composite index gained 5.6 percent to finish at 2,059.38, and the Standard & Poor's 500 rose 2 percent to 1,172.51.

The gains to the highest levels since August came even as corporate profits for the December quarter, due in the weeks ahead, are expected to show the fourth straight quarterly decline. Analysts surveyed by First Call do not expect an earnings rebound until this spring.

"Although you see things not as bad as we were, it doesn't mean we will [recover quickly],"  Robert Brusca, economist at Ecobest Consulting, told CNNfn's Before Hours.

Brusca expects the unemployment rate, which rose to 5.8 percent in December, to rise above 6 percent this year as out-of-work Americans find it tougher to get new jobs.

Some of that buying was attributed to "January effect," which occurs when investors buy in the first few sessions of the new year to take advantage of year-end selling.

Recent data on manufacturing and consumer confidence have come in stronger than expected. Employers last month cut fewer jobs than in any month since August.

Overseas, stocks in Tokyo and Korea led Asia higher, with the Nikkei index rising about 1 percent. But European stocks could not reverse their losses after Vivendi said it would sell shares to pay off debt.

Treasury prices were little changed in early trading. The dollar edged higher against the yen and the euro, but overall currency markets showed little impact from Argentina's decision to devalue its currency by about 29 percent.

Brent oil futures rose 13 cents to $22.31 a barrel in London.

AOL Time Warner (AOL: Research, Estimates), the world's largest media company and parent of CNN/Money, is scheduled to hold a conference call at the end of the day to talk about its plans and outlook for the year. Most analysts expect it to forecast earnings growth in the low double digits and scale back on its revenue projections for this year.

AOL shares fell 30 cents to $31.65 early Monday

Lucent Technologies named Patricia Russo as chief executive of the telecommunications company. Russo, who succeeds Henry Schacht, was Eastman Kodak's (EK: Research, Estimates)  president and chief operating officer.

Shares of Lucent (LU: Research, Estimates), off 66 percent from their 52-week high, fell 10 cents to $7 early Monday as the company tries to return to profitability.

"It's still unclear exactly when the economy and spending will return,"  Russo told CNNfn's Before Hours.

In the Microsoft case, a federal judge will consider a request from the software maker for a four-month delay of hearings on proposed tougher ways to punish the company for breaking antitrust law. Microsoft shares rose $1.10 to $70 early Monday.

But in the latest warnings shares of Vignette (VIGN: Research, Estimates), which makes software that helps companies manage the content of their Web sites, fell $1.27 to $4.20 before hours. The company said sales will fall way below estimates.

Only one company, Great Atlantic & Pacific Tea Co.  (GAP: Research, Estimates), the supermarket chain known as A&P, reported quarterly results Monday. The company earned $3.0 million, or 8 cents a share excluding items, compared with a net loss of $14.5 million, or 38 cents a share, a year earlier.

A&P shares rose 55 cents to $25.30 Friday.