Wall St. shows resilience
U.S. stocks focus on recovery hopes despite negative economic news.
NEW YORK (CNNmoney) - U.S. equity indexes made a small breakthrough Friday, pushing mostly higher, as stock investor sentiment kept negative economic news from overwhelming recovery hopes.|
A higher-than-expected unemployment rate and the last trickle of weak third-quarter results fit the recent trend of economic snags, but failed to outshine the optimism of investors looking towards 2002.
"We've stayed above some key support levels right now, despite the news, so that's a good thing," Maureen McCarthy, head of equity trading at Robertson Stephens, told CNNfn's Halftime Report.
U.S. stocks rebounded from a Monday-Tuesday selloff to rise higher by Friday. But the major indexes were hit hard enough in those days to still close down for the week.
The Dow Jones industrial average added 59.64 to 9,323.54, but was down 2.3 percent on the week. The Nasdaq composite index gave back 0.57 to 1,745.73 and was down 1.3 percent on the week. The Standard & Poor's 500 was up 3.10 to 1,087.20, but pulled back 1.6 percent on the week.
"A lot of people are surprised that the markets are behaving as well as they are. But there's a sense that even the negative numbers don't matter as much as they might have, that markets are preceding the turn of the economy," said Tim Heekin, head of stock trading at Thomas Weisel Partners.
The unemployment rate rose to 5.4 percent in October from 4.9 percent in September, the government said, representing the highest rate in nearly five years. There were 415,000 jobs lost in October, the steepest monthly loss since 1980, compared with a revised 213,000-job decline in September.
In a speech early Friday, President Bush said he was "very concerned" about the unemployment data and urged Congress to push through a stimulus package.
The higher-than-expected rise in unemployment gives further credence to the belief that the Federal Reserve will cut rates for the tenth time this year when it meets next week.
"As for the Fed, we look for 50 (basis points, a half-percentage point) next week," Ian Shepherdson, chief U.S. economist at High Frequency Economics, wrote in a morning note.
Also affecting markets was this week's U.S. Treasury decision to discontinue the 30-year bond. The decision has sent yields lower for the last few days, making stocks seem more attractive.
"This movement in the bond market is amazing, truly unprecedented. People are starting to sell fixed-income and put that money into stocks," Heekin said. "Equity is starting to look like this undervalued dark horse worth betting on."
Long-term Treasurys gave back some recent gains by the close of trade. As a result, the 30-year bond yield rose to a still relatively low rate of 4.94 percent from 4.80 percent Thursday. The 10-year note yield increased to 4.34 percent from 4.22 percent Thursday.
The dollar was flat against the euro and lower against the yen.
Tokyo's Nikkei index broke a five-session losing streak, but Asian stock markets were little changed at the close. European bourses were mixed at the close, with media, technology and insurance stocks rising and energy stocks pulling lower.
Energy stocks were hurt by falling oil prices. In London, Brent crude futures lost 27 cents to $19.35.
Market breadth was mixed. On the New York Stock Exchange, winners edged losers as 1.10 billion shares traded. On the Nasdaq, decliners edged advancers by a 5-to-4 margin as 1.62 billion shares changed hands.
Juniper, BEA Systems among most active
Computer hardware and wireless stocks held back the Nasdaq from joining in the rally, while computer software and semiconductor issues provided strength.
Software maker Microsoft (MSFT: down $0.44 to $61.40, Research, Estimates) and the U.S. Justice Department reached a settlement agreement in their landmark antitrust dispute.
Sun Microsystems (SUNW: up $0.60 to $11.44, Research, Estimates), Juniper Networks (JNPR: down $2.44 to $19.48, Research, Estimates) and Ciena (CIEN: down $1.37 to $15.09, Research, Estimates) were among the most active.
Qwest Communications (Q: down $0.03 to $11.97, Research, Estimates) pressured the communications equipment sector, including Ciena and Juniper, after the company announced it would stop the work of vendors and contractors on its network, raising fears about how this might impact telecommunications equipment makers.
Online discount travel auction site Priceline.com (PCLN: up $0.10 to $4.50, Research, Estimates) reported a third-quarter profit late Thursday that topped estimates. The company also raised guidance for the fourth quarter.
Online real estate site Homestore.com (HOMS: down $2.71 to $2.28, Research, Estimates) was not so fortunate. The company reported a sharp third-quarter loss and said its ad revenue had fallen 44 percent from the previous quarter.
Credit Suisse First Boston cut its ratings on BEA Systems (BEAS: up $0.91 to $12.61, Research, Estimates), an e-commerce software maker, after the company warned that its third- and fourth-quarter results would miss current expectations and that it would cut 10 percent of its work force by the end of 2001.
Drugmaker CIMA Labs (CIMA: down $18.32 to $36.69, Research, Estimates) warned that its fourth-quarter earnings and revenue would miss expectations.
On the upside, a number of brokerages chimed in with positive comments on information technology provider Computer Sciences (CSC: up $6.14 to $40.08, Research, Estimates) after the company said second-quarter earnings topped estimates. Looking forward, the company said the third-quarter result will miss estimates, but 2002 should surpass expectations.
Enterprise and supply chain software maker JD Edwards (JDEC: up $1.84 to $9.37, Research, Estimates) said late Thursday that fourth-quarter earnings will exceed previous guidance as a result of increases in license-fee revenue in the current quarter.
On the Dow, 3M (MMM: up $1.93 to $108.20, Research, Estimates) and Home Depot (HD: up $1.92 to $40.32, Research, Estimates) strengthened, while Eastman Kodak (EK: down $2.15 to $24.65, Research, Estimates), at 15-year lows, continued to fall.
Unemployment data only latest bad news
The unemployment report was only the latest discouraging piece of news about the U.S. economy to surface in the last few days.
On Thursday, a report issued by the National Association of Purchasing Management showed that U.S. manufacturing activity fell substantially in October. It was the first substantial check-up of the nation's health following the events of Sept. 11. The unemployment data was the second.
"The drop in payrolls reflects the events of Sept. 11. We have no
way of knowing what would have happened otherwise," High Frequency Economics' Shepherdson wrote in a morning note.
Shepherdson sees unemployment rising through 6 percent next year. But he points out that the report lags the economy, noting that it rose for five quarters after the 1991 recovery started.
In the latest on the retaliatory strikes in Afghanistan, U.S. Air Force B-52 bombers hit Taliban troop positions north of the capital city of Kabul.
In California, security measures have been heightened in response to what Gov. Gray Davis called a "credible threat" against the state's major bridges.