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Nasdaq sees rare rally
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December 22, 2000: 5:09 p.m. ET
Technology stocks surge for a day but analysts wonder if the gains can last
By Staff Writer Jake Ulick
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NEW YORK (CNNfn) - Just two days after tumbling to a 22-month low, the Nasdaq composite index surged more than 8 percent Friday as bargain-hunting investors found battered technology stocks too cheap to ignore.
Cisco Systems, which hit a 52-week low on Wednesday, gained more than 6 percent. Yahoo advanced 15 percent one day after falling to levels not seen since 1998.
"I think the market is due for some sort of rally," Tom Gallagher, head of trading at CIBC World Markets, told CNNfn's market coverage. "The market is very oversold."
 But when it comes to sustainability, Gallagher and others are skeptical. Eight of the Nasdaq's biggest gains on record happened in 2000. But none has shown any longevity in a year when the index is down 50 percent from its high in March.
"I think it is going to be very difficult to make money out of this rally," Gallagher said.
The Nasdaq rose 176.90 points, or 7.6 percent, to 2,517.02, its second gain in nine sessions. But the Nasdaq's Santa Claus rally, its fifth biggest percent rise on record, wasn't enough to keep it from shedding 5.2 percent on the week.
The Dow Jones industrial average climbed 148.27, or more than 1.4 percent, to 10,635.56 and has gained 1.9 percent over the last five sessions. The S&P 500 advanced 31.09, or 2.4 percent, to 1,305.95. But the index shed 0.5 percent on the week.
 In other markets, the dollar fell against the euro but rose versus the yen. U.S. Treasury securities edged higher.
More stocks rose than fell. Advancing issues on the New York Stock Exchange beat declining ones 2,037 to 890 as more than 1 billion shares traded. Nasdaq winners topped losers 2,668 to 1,291. More than 2.2 billion shares changed hands.
The bond market, which has outperformed the stock market this year, closed at 2 p.m. ET Friday. Monday brings a full stock and bond market close for Christmas.
Sifting amid the wreckage
With the Nasdaq down 38 percent year-to-date, and within sight of its worst year on record, investors nibbled at some of the hardest hit tech shares Friday.
Cisco Systems (CSCO: Research, Estimates), off 40 percent in the last six months, gained $2.63 to $41.50. Yahoo! (YHOO: Research, Estimates), which has lost three-quarters of its value this year, advanced $3.94 to $29.56.
 On the Dow, IBM (IBM: Research, Estimates) gained $7.44 to $89, while Microsoft (MSFT: Research, Estimates) rose $3 to $46.44.
Still, the day's rally couldn't quite wipe out the Nasdaq's 178.93 point plunge Wednesday, one of dozens of big slides for the index since March's peak.
"The markets are capable of rallying," Linda Jay, NYSE trader with RPM Securities, told CNNfn's Market Call. "But whether they can maintain the rally is more important, particularly with the Nasdaq."
Amid a steady diet of companies pre-announcing disappointing earnings and revenue, more than $2.5 trillion dollars in stock market value has disappeared this year. That's according to Wilshire Associates, which runs the Wilshire 5000, the broadest U.S. market index.
In one of the latest corporate warnings, Ford Motor Co. said Thursday it now expects to earn 64 cents a share in the current quarter, 10 cents below the 74-cents-a-share forecast of analysts surveyed by First Call. Ford (F: Research, Estimates), which blamed the shortfall on weather-related losses in North America and parts shortages outside North America, fell $1.38 to $22.81.
"We still have two weeks of earnings warnings ahead," RPM's Jay said.
Still, Jay forecasts that the stock market could move higher once companies in late January and February begin reporting earnings for the last three months of 2000.
Fed to the rescue?
Profits are slowing, and already some economists are talking about an interest-rate cut by the Federal Reserve before its regular meeting in late January. The Fed on Tuesday left rates unchanged but also signaled its readiness to lower borrowing costs next year.
At least two other negatives face the market next week, which brings the last four trading days of the year. Investors seeking to offset any capital gains taxes may continue selling losing stocks.
At the same time, money managers with an eye on end-of-the-quarter client reports may resume the dumping of struggling stocks to show their clients they only own winners.
As such, many market watchers called the Friday's action just a short-term blip.
 "Technically, it looks like no more than a reflex rebound, an oversold bounce," Clark Yingst, market analyst at Prudential Securities, told CNN's Street Sweep.
The falling stock market has helped slowed the level of merger activity this fall. But acquisitions haven't ground to a halt.
Among them, Litton Industries (LIT: Research, Estimates) surged $15 to $77.63 after Northrop Grumman agreed to acquire the No. 1 builder of non-nuclear ships for the U.S. Navy for $3.8 billion in cash.
Northrop (NOC: Research, Estimates), the aircraft maker, fell $7.06 to $74.88. 
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