Stocks kept gains to finish higher Wednesday for the third, consecutive day, after an influential investment strategist urged investors to swap cash for stocks.
Goldman Sachs' Abby Joseph Cohen boosted stock holdings in her model portfolio to 70% from 65%. She also urged investors to use their cash to buy stocks, which is the opposite of the call she made in March of last year. But more bad outlooks from tech giants kept the effects of Cohen's strategy change in favor stocks to a minimum.
The Nasdaq, meanwhile, kept slim gains as investors wondered why trading in shares of Internet portal Yahoo! (YHOO) was halted earlier in Wednesday's session.
According to news reports, Merrill Lynch analyst Henry Blodget questioned Yahoo's decision to cancel its appearance at the brokerage's Internet Conference. Rumors on Wall Street were speculating the news may be related to bad earnings or an acquistion, among other possible scenarios. Yahoo!, meanwhile, was keeping mum on the talk, with an official announcement scheduled for later Wednesday.
Many traders were expecting negative news in line with ugly announcements made by Yahoo!'s peers. "It will be interesting to see how the market handles it, if it is negative news," said Jay Suskind, director of equity trading at Ryan Beck & Co.
"It seems like the margin economic news, and particularly news out about technology companies, continues to be negative, but we were still having this rally in the Nasdaq," Clyde Randall, co-manager of ARK Funds: Blue Chip Equity Portfolio/Retail A and ARK Funds: Equity Income Port/Instl, told Standard & Poor's AdvisorInsight.
In corporate news, fiber-optic telecom parts maker JDS Uniphase Corp. (JDSU) stumbled after it trimmed its performance forecasts. After the market close Tuesday, the company cut its forecasts for third- and fourth-quarter performance, blaming a weakening U.S. economy and decreased customer demand.
Communications chip company Broadcom Corp. (BRCM) issued a similar forecast. The company cut its outlook for first-quarter profits and revenues, blaming a sluggish economy for a slowdown in orders.
Also in technology, chairman of chip giant Intel Corp. (INTC), a Dow component, said Tuesday he didn't expect demand for chips to rebound quickly.
The Dow Jones Industrial Average ended up 137.99 points, or 1.30%, to 10,729.21. The Nasdaq closed up 19.47 points, or 0.88%, to 2,223.90. The S&P 500 finished up 7.95 points, or 0.63%, to 1,261.75.
Treasuries finished higher. In the latest economic news, the Federal Reserve said U.S. economy grew at a "sluggish to modest" pace at the start of the year, helped by slightly stronger consumer spending as retailers cut prices to clear their shelves, according to news reports. Additonally, the latest Beige Book summary, which covers the period from Jan 10-Feb. 26, suggested the record U.S. economic expansion remained intact, though it clearly has lost much of the sizzle it once displayed.
Also Wednesday, Federal Reserve Chairman Alan Greenspan said it was not surprising a weaker economy was making bankers wary about lending, but he urged them not to go overboard, according to news reports. The Fed is widely expected to cut rates for a third time this year at the conclusion of its March 20 meeting.
Looking ahead into the rest of the week, treasuries are likely to trade sideways, as investors lack any key economic data until the February U.S. jobs report on Friday, according to Standard & Poor's AdvisorInsight. The jobs report is expected to show few new jobs were created in the month.
Stocks in the News
Media giant Dow Jones (DJ) said it sees first quarter earnings per share in the range of $0.16 to $0.20, below expectations, on softer than anticipated ad revenues. The company expects Wall Street Journal per-issue linage to decline 25% to 30% in the first quarter compared with a 38.2% increase.
Retailing company Venator Group (Z) posted adjusted fourth quarter EPS of $0.26 compared with $0.02, on 9.3% higher sales from stores open at least one year. The company says it is comfortable it can achieve first quarter EPS of $0.20 to $0.22.
Oil giant Royal Dutch/Shell made a grab for more access to the booming U.S. gas markets with a hostile $2.2 billion bid for Rocky Mountains producer Barrett Resources (BRR), according to a Reuters report.
European stocks ended mixed. In London, the Financial Times-Stock Exchange 100 index ended down 10.20 points, or 0.17%, to 6,001.80. Germany's DAX Index ended higher by 21.58 points, or 0.34%, to 6,305.64. In France, the CAC 40 finished up 26.40 points, or 0.48%, to 5,483.68.
Asian equities closed mixed. In Japan, the Nikkei Index gained 36.15 points, or 0.28%, to 12,723.89. In Hong Kong, the Hang Seng lost 143.69 points, or 1.00%, to 14177.36.