U.S. stocks carve out gains

Wall St. gets a boost

April 17, 2001: 4:30 p.m. ET

Optimism returns amid a slew of results, warnings, and economic news
By Staff Writer Catherine Tymkiw

NEW YORK (CNNfn) - U.S. stocks carved out gains Tuesday afternoon as investors signaled renewed optimism amid a plethora of quarterly results, economic reports and warnings.

All three major indexes flip-flopped throughout the trading session, renewing the perception that the bottoming-out process was taking hold.

"It's been the good, the bad and the ugly," Ned Riley, chief investment strategist with State Street Global Advisors, told CNNfn's Street Sweep. "I think this period is still going to be ugly for earnings but the market has discounted it."

An earnings and revenue warning by Cisco Systems just confirmed what most already know -- that technology companies will continue to face difficulties in a slowing economy.

"There was every reason in the world for the market to get hit today," said Peter Coolidge, senior trader with Brean Murray & Co. "If you're a bull on techs, today's action is fairly encouraging. I think the market is so conditioned to accept bad news that as long as the company takes these things proactively, the market is accepting of that."

The Nasdaq composite index rose 13.65 to 1,923.22. The Dow Jones industrial average gained 58.17 to 10,216.73, while the Standard & Poor's 500 advanced 11.85 to 1,191.53.

Despite the negativity that laced through the markets, analysts were encouraged that there wasn't a greater volume of selling.

"When the market refused to acquiesce (to Cisco's news), that was uncharacteristically resilient of this market," said Michael Holland, chairman of Holland & Co. "People are now looking for reasons why the market isn't doing more."

Market breadth was positive. On the Nasdaq, winners beat losers 2,070 to 1,725 as more than 1.85 billion shares were traded. Advancers outpaced decliners on the New York Stock Exchange 1,856 to 1,170 as more than 1.07 billion shares changed hands.

In other markets, Treasury securities edged higher. The dollar fell against the yen but advanced versus the euro.

Investors shake off Cisco
Hopes were temporarily dashed that the worst was over for technology companies after Cisco issued a profit warning late Monday. But investors quickly recovered.

"Investors are not put off now by the onslaught of disappointing earnings expectations," said Gruntal's Joseph Battipaglia. "I think we're well through the inflection point where the market will continue to recover, even though earnings estimates will continue to be cut for the next several months."

The market has been barraged by negative guidance from technology firms to the point that analysts said news, such as Cisco's, should come as no surprise.

"It didn't surprise us that they came out and warned, but it's a pretty encouraging sign that you come up with a dire forecast from Cisco and the stock is still $3 above its low," said John Forelli, portfolio manager with Independence Investment Associates.

Networking leader Cisco Systems (CSCO: down $0.54 to $16.66, Research, Estimates) announced that it will report fiscal third-quarter earnings per share in the "low, single-digit range," compared with the 8 cents a share expected by analysts surveyed by First Call. The company also said it plans to eliminate roughly 8,500 jobs, just above the high end of a previously announced range of cuts.

But the pain for technology stocks likely will continue until the negative guidance abates.

"I don't think the market can make a lot of headway until we get an idea of the depth and breadth of the profit recession," James Awad, money manger with Awad Asset Management, told CNNfn's Before Hours.

No. 3 U.S. long-distance telephone company Sprint (FON: down $1.37 to $22.04, Research, Estimates) warned that 2001 results will fall sharply under expectations, reporting that first-quarter net income fell 72 percent amid lower calling prices, stiff competition, and investments to build its data and wireless businesses.

After the market closed, Texas Instruments (TXN: up $0.99 to $34.00, Research, Estimates) reported a first-quarter profit that beat estimates by 2 cents. The company earned 18 cents a share and announced it would cut its work force by 6 percent.

But Intel (INTC: down $0.26 to $26.04, Research, Estimates) is the name that's expected to draw the most attention after the bell. Analysts surveyed by First Call forecast that the chipmaker earned 15 cents a share in the first quarter, down from 36 cents a share a year earlier.

After the market closed Tuesday, the chipmaker posted results that beat estimates by a penny, earning 16 cents a share for the first quarter.

Four Dow components posted results before the market opened Tuesday.

Eastman Kodak (EK: down $1.00 to $42.50, Research, Estimates), the photography company, announced a first-quarter profit that edged past estimates, but it also lowered earnings forecasts and announced a cut of up to 3,500 jobs.

Health care products maker Johnson & Johnson (JNJ: up $1.85 to $94.45, Research, Estimates) posted improved first-quarter results, beating Wall Street expectations by 2 cents a share.

Caterpillar (CAT: down $1.00 to $45.75, Research, Estimates), the industrial products maker, posted first-quarter earnings of 47 cents a share, below analysts' estimates of 48 cents. Meanwhile, Philip Morris (MO: up $1.25 to $47.81, Research, Estimates), the tobacco and food products maker, reported first-quarter earnings of 95 cents a share, just above the 94-cent analysts' consensus.

	EARNINGS ROUNDUP
		Click below for a comprehensive look at the day's corporate results Earnings Roundup

Enron (ENE: up $0.56 to $60.00, Research, Estimates), North America's biggest marketer of electricity and natural gas, reported skyrocketing revenue and first-quarter earnings that beat Wall Street forecasts, and said it expects its 2001 earnings to meet or exceed analysts' estimates.

Nine days after its primary unit filed for bankruptcy, Pacific Gas & Electric (PCG: up $0.06 to $8.90, Research, Estimates) reported fourth-quarter losses of more than $4.1 billion, or $11.34 per share. The results included a one-time loss of $4.1 billion related to its bankruptcy filing for protection from creditors because of unreimbursed power costs

Economy shaping up
The economic slowdown and three interest rate cuts by the Federal Reserve have prompted investors to crave more aggressive moves by the Fed ahead of its monetary policy meeting May 15.

"I think they're right on the curve but in danger of being behind the curve," Alan Blinder, professor of economics at Princeton University and former vice chairman of the Federal Reserve, told CNNfn's The Money Gang.

But analysts said the Fed is doing its job and monitoring the incoming data. Investors are also grabbing onto any data for signs of what the Fed may or may not do -- and they had plenty to digest Tuesday.

"Don't confuse weakness in the market as indicative of proof that the economy is coming apart at the seams," said Bill Meehan, chief market analyst with Cantor Fitzgerald. "We're not in a freefall, economically speaking, and the technology sector has problems -- we all know that."

The closely watched Consumer Price Index, a measure of inflation, rose 0.1 percent in March, according to a Department of Labor report, matching the 0.1 percent forecast by analysts, and below a 0.3 percent jump in February. Perhaps more significantly, the so-called core CPI, which excludes often-volatile food and energy prices, rose 0.2 percent in March, in line with forecasts and slightly below February's core CPI figure of 0.3 percent.

"It's a slight positive and gives the Fed more leeway in terms of lower interest rates going forward without the fear of impending inflation," said Jim Gribbell, portfolio manager with David L. Babson which oversees $65 billion in institutional assets.

U.S. industrial production posted surprising gains in March, according to government reports released Tuesday. U.S. industrial output rose 0.4 percent in March, according to a Federal Reserve report, compared with a 0.4 percent dip in February. Analysts surveyed by Briefing.com expected output to fall by 0.2 percent.