Wall Street Surges Amid Good EarningsOctober 15, 2002
DJIA8255.68+378.28
NASDAQ1282.44+61.91
S&P 500881.27+39.83
Stocks soared Tuesday as solid earnings from financial giant Citigroup and automaker General Motors fueled investors' hopes that a turnaround is near for the battered stock market.
Market gauges closed the regular trading day at or near session highs, typically a bullish sign. The Dow Jones industrial average soared 378.28 points, or 4.8 percent, to 8,255.68, giving the average its seventh-largest point gain ever. The broader Standard & Poor's 500 Index surged 39.83 points, or 4.73 percent, to 881.23. The technology-laced Nasdaq Composite Index added 61.91 points, or 5.07 percent, to 1,282.44.
"It feels like we're starting to get momentum behind us," said Evan Olsen, head of equity trading at Stephens Inc. "Citigroup and GM were a great way to start the day. People are starting to get more confidence."
Citigroup (C), the Big Board's most active issue, jumped $3.84 to $34.15, or 12.6 percent, and was among the biggest percentage gainers on the Dow. The financial services giant posted profits that narrowly beat forecasts.
Dow stock General Motors (GM) surged $3.44, or 10 percent, to $36.70. The world's No. 1 automaker posted stronger-than-expected results, before charges related to a write-down for its stake in the automotive operations of Italy's Fiat SpA . The company also raised its earnings estimates for the year.
This marks one of the busiest weeks of the quarterly earnings season, when companies reveal financial results. About 150 of the Standard & Poor's 500 index companies are scheduled to post results, and some investors are betting the numbers will bring good news after a storm of dour financial warnings.
Although worries linger over the economic rebound, a possible war on Iraq and more attacks after the blasts in Bali, investors are hoping bad news is already baked into the market.
Still, jitters about earnings are not far from the surface. Intel Corp. (INTC) shares fell to $14.70 after the closing bell from their Nasdaq close at $16.52. After the regular session ended, the computer-chip giant reported per-share earnings at the lower end of expectations. Intel also said it would cut its capital expenditures for 2002. During regular trading, Intel had jumped 9 percent or $1.42.
Motorola (MOT) was also scheduled to release its quarterly results after the closing bell.
Stocks have added about $1 trillion in value since touching five- and six-year lows last Wednesday, according to Wilshire Associates.
"It's feeling awfully good," said Arnie Owen, managing director of equities at Roth Capital Partners. "It's widespread, and it's broad-based. The market has gone through pre-earnings disasters, and it's looking for things to celebrate."
"There's been a lot of pain and a lot of bloodshed, it's got to end at some point," said Phil Orlando, chief investment officer of Value Line Asset Management, which oversees $6 billion.
U.S government bond prices dropped and gold prices fell to a four-week low as investors dumped safe havens in favor of the riskier equity market.
Financial shares surged. Dow member J.P. Morgan Chase & Co. Inc. (JPM) climbed $1.77, or 10 percent, to $18.65. American Express Co.(AXP), another Dow component, jumped $2.62, or 8 percent, to $33.72.
Bank One Corp.(ONE), the No. 6 U.S. banking company, tacked on $2.61, or 7 percent, to $39.74. The company reported higher quarterly earnings, helped by higher balances at its credit card business, deposit growth and cost controls.
"People are chasing bank stocks today -- they're the flavor du jour," said Donna Van Vlack, head trader at Brandywine Asset Management.
On a dark note, medical diagnostics company Beckman Coulter Inc. (BEC) said third-quarter sales and earnings will fall short of its forecasts as cuts in development spending by drug companies hurt demand for its medical diagnostics equipment.
The warning pushed Beckman Coulter shares down $8.71 or more than 23 percent, to $28.42.
But many other companies have posted profits that beat expectations.
"So far, only one company, Beckman Coulter, was truly a disappointment -- everyone else seems to be in line or maintaining guidance," said Van Vlack. "That's giving people hope that things aren't getting much worse."
Software giant Microsoft Corp.(MSFT) climbed $3, or 6.1 percent, to $52.29 after investment bank Goldman Sachs said the Dow member will meet or slightly exceed its sales and earnings-per-share expectations as the company likely benefited from strong licensing activity in July. Microsoft, also among the most active Nasdaq stocks, is set to report earnings Thursday,
Maytag Corp.(MYG), the third-biggest U.S. home appliance maker, jumped $3.45, or almost 17 percent, to $24.02. The company posted higher third-quarter earnings and helped spark a rise in the shares of other home appliance companies. Whirlpool Corp. rose $4.31 to $48.85. Black & Decker Corp. rallied $2.88 to $43.66.
"The rash of positive earnings reports was a pleasant surprise," said Stephen Carl, head of trading at the Williams Capital Group, LP. "With no economic news until Thursday, we could be in store for another up day tomorrow if companies continue to post strong numbers."
A government report showing that U.S. businesses cut back on their inventories in August failed to damp enthusiasm. Inventories at retailers, manufacturers and wholesalers fell by an unexpected 0.1 percent in August, the Commerce Department said. It was the first decline since April and reflected a 0.5 percent drop in stockpiles of autos and parts.
Economists in a Reuters poll forecast, on average, that inventories would inch up by 0.1 percent in August following a 0.4 percent increase in July.
A separate report showed that U.S. chain store sales rose in the first retail week of October led by food and home goods purchases at the nation's discounters. Sales grew 1 percent in the week ended Oct. 12 compared with the same period in September, Instinet Research said in its weekly Redbook report.
Volume was brisk, with about 1.9 billion shares changing hands on the New York Stock Exchange and almost 2 billion on the Nasdaq. Winners outnumbered losers by a ratio of about 3 to 1 on the NYSE and by slightly more than 3 to 1 on the Nasdaq.
The Russell 2000 index, which tracks smaller company stocks, rose 14.00, or 4 percent, to 360.53.
Overseas, stocks rose sharply Tuesday. Japan's Nikkei stock average closed up 3.6 percent. In Europe, Britain's FTSE 100 rose 5.1 percent, while France's CAC-40 and Germany's DAX index each surged 7 percent.
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