--DJIA up 68; Nasdaq up 27; S&P 500 up 13
--Networkers, telecom up; Oil stocks down
By Rebecca Byrne New York, June 21 (BridgeNews) - The Nasdaq ended higher Thursday as investors scooped up networking and telecom stocks, which have suffered from heavy losses recently. The broader market also recorded gains, aided by strength in the financial sector. The Nasdaq closed up 27.50, or 1.35%, to 2058.74. The Dow was up 68.10, or 0.64%, to 10,715.43 and the S&P 500 was up 13.90, or 1.14%, to 1237.04.
"Investors are trying to rebound after a string of bad days," said John Forelli, portfolio manager at Independence Investment. "All in all, we're seeing recent losers (bounce) back a bit." Still, Forelli said the market remains mired in a trading range. While stocks probably won't test old lows, "there's nothing in the near term that's going to break us into new highs either," he said.
Networking stocks were among the biggest gainers in the market Thursday, with Cisco Systems (CSCO) up 8% to 17.68; JDS Uniphase (JDSU) up 10% to 10.97 and Nortel Networks (NT) up 5% to 8.45. The Amex Networking index, which fell 27% over the past nine trading days, rose 3% to 331. Telecom and Internet stocks, which lost roughly 15% over the last eight days, both rose about 3% on average.
Financial stocks also led the gainers in the market, with Morgan Stanley (MWD) up 9% to 64.95 after the firm reported second-quarter earnings of 82 cents a share, which beat analysts' estimates of 79 cents. Still, the largest U.S. securities firm saw profits fall by 36% year-over-year as the firm struggled with the slumping equity market and a continued slowdown in corporate activity. "I think people are more hopeful that we'll get a 50 basis point cut rather than 25," said Tony Cecin, head of equity trading at U.S. Bancorp Piper Jaffray. "Combine that with the fact that the Nasdaq is now 12% off its May highs and you've got some money coming in off the sidelines." Despite the generally positive sentiment Thursday, profit warnings from some second-tier names tempered the enthusiasm. Exodus Communications (EXDS) plunged 29% to 1.59 after the company slashed its revenue estimates for the second quarter and the year and said it plans more layoffs. Verity (VRTY) and Transmeta (TMTA) also weighed in with gloomy forecasts, sending their stocks into a tailspin. Verity fell 21% to 17.23 while Transmeta slid a whopping 57% to 5.36. Sanmina (SANM) issued a negative pre-announcement but the stock rose 5% to 21.18.
Meanwhile, Bear Stearns cut its earnings estimates on PMC Sierra (PMCS), LSI Logic (LSI) and Conexant (CNXT), saying there is a risk that the companies will guide estimates lower for the second or third quarters. While stocks with exposure to PCs could see modest growth in the third quarter, the firm said, stocks with exposure to telecom or networking markets are likely to see declines into the third quarter.
On the Dow, Citigroup (C) jumped almost 6% while General Motors (GM) and Alcoa (AA) rose 4%. AT&T (T), Home Depot (HD), Eastman Kodak (EK) and JP Morgan (JPM) each added 3%. Microsoft (MSFT) also rose despite talk that state attorneys general are concerned about the impact of Windows XP and are considering filing a new antitrust lawsuit against the firm. Boeing (BA), SBC Communications (SBC) and 3M (MMM) led on the downside. IBM (IBM) also slipped after Prudential Securities analyst Kimberly Alexy said IBM's business challenges will increase as the year progresses and that growth expectations will need to be revised downward. Alexy said IBM faces weakness overseas, a sharp decline in the euro and no sign of an upturn in IT spending before the end of the year. IBM fell 0.49 to 112.60. Honeywell (HON) was another loser, down 0.29 to 36.75 after Salomon Smith Barney cut its rating and estimates on the stock to reflect the fact that it most likely will not merge with General Electric (GE).
Volume on the NYSE reached 1.47 billion shares, with advances beating declines by 17 to 13. Nasdaq volume hit 2.11 billion, with winners beating losers by 5 to 4. In the bond market, the 30-year Treasury rose 14/32, pushing its yield down to 5.627%. Meanwhile, NYMEX Aug crude futures were up 8 cents at $26.56 a barrel on growing sentiment there will be no output hike from OPEC. In currency trade, the euro rose against the dollar to 85.52 cents. The dollar rose against the yen to 124.56.
CORPORATE NEWS Carnival Corp.'s (CCL) second-quarter earnings fell marginally to 32 cents a share, from 34 cents last year. However, the numbers exceeded analysts' expectations of 30 cents. Carnival said it believes that consensus earnings per share estimates for the full year are reasonable. Shares rose 8% to 28.40. Countrywide Credit Industries Inc. (CCR) reported first-quarter earnings of $1 a share, beating First Call estimates of 98 cents. Countrywide expects to earn $1.15 to $1.20 a share in the second quarter, above the $1.01 estimate. Shares rose 6% to 44.30.
Knight Trading Group Inc. (NITE) said it will slash about 6% of its U.S. work force to reduce expenses amid slumping markets and anemic trading activity. Knight fell 0.02 to 9.95. Philip Morris Cos. Inc. (MO) will meet with the U.S. Department of Justice regarding its tobacco lawsuit. In a September 1999 lawsuit, the department alleged that tobacco companies concealed information on the harmful effects of smoking and that the government is entitled to recover billions of dollars spent annually on smoking-related health care costs. Shares rose 2% to 47.66.
ECONOMIC NEWS The U.S. trade deficit narrowed in April, shrinking 2.7% to $32.2 billion as weak demand for imports and exports, and continued culling of overbuilt inventories provided modest improvement compared with a revised $33.1 billion deficit in March. The April trade gap narrowed despite a 5.3% jump in the cost of oil imports, and a record average of barrels imported per day. In a reflection of weak global demand, both imports and exports of capital goods declined.
The Federal Reserve Bank of Philadelphia Research Department reported that its manufacturing index rose slightly to -3.7 in June from -8.8 in May. The index remained negative but the future business index jumped to 58.2 from 33.1 in May, suggesting recovery in the next six months.
BIGGEST GAINERS EMCORE Corporation (EMKR) rose 18% to 27.06 after Wit Soundview upgraded the stock to strong buy from buy, and raised its 2002 earnings estimate to 57 cents from 54 cents, citing the solid fundamentals of company's various product lines. Synplicity Inc. (SYNP) rose 18% to 13.91 after Robertson Stephens upgraded the stock to buy from market perform, saying it believes the company is on track to achieve its second quarter estimates of $12.8 million in revenue and 2 cents per share.
BIGGEST LOSERS American Greetings Corp. (AM) fell 18% to 11.68 after saying it plans to sell $250 million in senior subordinated notes due 2008 and $125 million of convertible senior subordinated notes due 2006. Compagnie Generale de Geophysique (GGY) fell 15% to 11.50 after lowering its revenue and earnings expectations for the first half of 2001 due to exceptionally unfavorable weather.
FRIDAY'S OUTLOOK U.S. stocks are seen weaker on the start as technology issues showed signs of fatigue late Thursday. The potential for more earnings warnings continues to overhang the market, traders said. Equities futures, which typically signal the direction of the cash market, ended Chicago trade with a mild downside bias for technology issues. S&P 500 futures finished at 1243, or a point below fair value, indicating a slight bearish bent on the close. Nasdaq 100 futures ended at 1757, or 10 points below fair value. Dow futures closed at 10,755, with fair value at 10,766. The Nasdaq 100 after-hours indicator was down 0.39 to 1721.17 at 1650 ET. No major economic news or earnings results are due out Friday.