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Markets & Stocks
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Wall St. turns around
graphic October 5, 2001: 5:29 p.m. ET

U.S. stocks ignore early lows, Sun Microsystems warning to close higher
By Staff Writer Alexandra Twin
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    NEW YORK (CNNfn) - U.S. equity indexes rose Friday as a late-day blue-chip rally, fueled by a tax-cut proposal from President Bush, lifted stock investors out of the tech-selling turmoil that had dominated trade following a quarterly-results warning from Sun Microsystems.

    "Investors are coming back. Even though it's still a nervous market, there is still some great valuation out there," Sarat Sethi, portfolio manager and partner, Douglas C. Lane & Associates, told CNNfn's Street Sweep.

    The Dow Jones industrial average closed the day up 58.89 at 9119.77. The average rose 272.21 points, or 3.07 percent on the week.

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    The Nasdaq composite closed up 7.99 to 1605.30, crossing 1600 for the first time since September 10, the day before the attacks against the United States. The composite was up 106.20 points or 7 percent on the week, the best performance on a weekly basis since late April.

    The Standard & Poor's 500 closed up 1.76 to 1071.38. The index finished the week up 30.44 points, or 2.9 percent.

    Most of the day was marked by tech selling, sparked by quarterly results warnings from Unix server maker Sun Microsystems and chipmaker Advanced Micro Devices.

    Markets seemed to turn upward after President Bush held a press conference about his economic stimulus package. He urged Congress to pass an additional $60 billion in tax relief for both individuals and businesses.

    Blue chip stocks, often associated with the Dow, made gains more on this news than any specific company releases. Microsoft (MSFT: up $1.28 to $57.72, Research, Estimates), Procter & Gamble (PG: up $1.49 to $72.69, Research, Estimates), Merck (MRK: up $1.16 to $68.26, Research, Estimates) and International Paper (IP: up $1.59 to $36.10, Research, Estimates) were among the names lifting the average.

    Sun Microsystems (SUNW: up $0.58 to $9.87, Research, Estimates), the largest maker of the Unix servers that power Web sites and many corporate networks, warned that it will lose money in its fiscal first quarter, when analysts had expected a profit, and that it will cut 9 percent of its work force.

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    Chipmaker Advanced Micro Devices (AMD: down $0.40 to $8.60, Research, Estimates) warned that it would see a much larger-than-expected third-quarter loss due to slowing demand for the chips used in personal computers.

    "People weren't expecting good news from Sun, so it's not a surprise, but there's been some enthusiastic tech news recently and you need a string to keep that going," said Kenneth Sheinberg, head of listed trading at SG Cowen. "Sun didn't provide that, and in fact they countered that, so people are backing off a little bit."

    In the last two days Dell Computer and Cisco Systems had sparked some buying after the two tech leaders offered a ray of hope by reiterating quarterly forecasts.

    A Labor Department report showed that while U.S. employers cut almost 200,000 jobs, nearly twice what economists expected, the unemployment rate held steady at 4.9 percent rather than rising as economists forecast. However, the data may not say much about the impact of last month's terrorist attacks against the United States.

    Asian markets closed mixed while the tech selling burdened European stocks. Treasury prices were mostly flat, surprising some analysts who thought the unemployment numbers would have given government debt prices a lift. The dollar was weaker against both the euro and the yen.

    Market breadth was mixed. On the New York Stock Exchange, advancers and decliners were evenly split as 1.29 billion shares traded. On the Nasdaq, losers edged out winners as 1.82 billion shares traded.

    Sun pressures computers, software

    The Sun and AMD warnings initially pressured much of the computer hardware, software and chipmaker sectors. But the losses eased later in the session, enabling the Nasdaq composite to come off of its earlier lows. Most sectors closed the day near to the breakeven point, with networking issues closing up two percent.

    Personal computer maker Gateway (GTW: up $0.15 to $5.00, Research, Estimates) warned late Thursday that its third-quarter loss will be considerably larger than had been expected, due to slowing sales. However, the stock turned around its losses by the close.

    Dell (DELL: up $0.24 to $22.56, Research, Estimates), Compaq (CPQ: down $0.03 to $8.82, Research, Estimates), Oracle (ORCL: up $0.41 to $14.20, Research, Estimates) and Dow component IBM (IBM: up $0.71 to $98.02, Research, Estimates) were among the issues reacting to the news.

    Networking issues and chipmakers, in general, erased losses.

    Lehman Bros. lowered Cisco's (CSCO: up $0.52 to $14.94, Research, Estimates) full-year 2002 earnings per share estimates to 22 cents from 31 cents, although it sustained its long-term "buy" rating and Intel had initially been pressured by the AMD (AMD: down $0.40 to $8.60, Research, Estimates) news.

    The software storage sector also showed a turnaround. EMC (EMC: up $0.65 to $13.15, Research, Estimates) rose even after Banc of America revised third-quarter estimates to a loss of 8 cents a share from a loss of 5 cents, citing difficult information-technology spending conditions. Sector mates Emulex (EMLX: up $1.71 to $16.40, Research, Estimates) and QLogic (QLGC: up $1.91 to $27.50, Research, Estimates) rose in tandem.

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    Biopharmaceutical companies Xoma (XOMA: down $2.76 to $7.00, Research, Estimates) and Genentech (DNA: down $1.64 to $41.51, Research, Estimates), which have been developing a psoriasis drug, said they will delay filing for regulatory licensing until summer 2002.

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    Competitor Biogen (BGEN: up $0.82 to $53.76, Research, Estimates), which is marketing its own psoriasis drug, rose on the news.

    Telecommunication and fiber-optic issues showed some strength.

    Agere Systems (ERICY: up $0.18 to $3.76, Research, Estimates) said it paid back $1 billion of the $2.5 billion of debt it took on when it was spun off by Lucent Technologies (LU: up $0.29 to $6.49, Research, Estimates) in March 2001. Corning (GLW: down $0.02 to $7.68, Research, Estimates) shares tried to rally, but closed lower.

    But U.S. Bancorp Piper Jaffrey cut estimates for telecommunications maker Qualcomm (QCOM: down $3.54 to $38.46, Research, Estimates).

    Specialty coffee retailer Starbucks (SBUX: up $1.89 to $16.96, Research, Estimates) rose, saying it is comfortable with previously-announced 2001 earnings per share estimates of 46 cents, while software maker Micromuse (MUSE: up $1.50 to $8.93, Research, Estimates) said it is comfortable with fourth-quarter and 2001 estimates.

    Abby Joseph Cohen, the influential Goldman Sachs chief investment strategist, said she expects the S&P 500 to rise as much as 33 percent by the end of 2002. Cohen said in a research note that she sees the index closing between 1,300 and 1,425 by the end of next year, pointing to an economic recovery. graphic

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