Stocks finished higher Wednesday as losers of the past two days rebounded, fueled by short-covering and bargain hunting. The major averages had been lower most of the day after Advanced Micro Devices (AMD) lowered sales estimates for the second time in a month. There was little reaction to the latest batch of economic data.
The Nasdaq composite index gained 22.28 points, or 1.64%, to 1,380.10, led by a rebound in tech stocks. Declines in the last two days had pushed the Nasdaq to new 5-year lows.
The Dow Jones industrial average added 39.50 points, or 0.44%, to 9,047.28, helped by gains in Home Depot (HD). And the broader Standard & Poor's 500-stock index was up 5.89 points, or 0.62%, to 953.98.
The market will be closed Thursday and close early at 1:00 p.m. ET on Friday.
The major focus Friday will be the June employment report. S&P MMS expects nonfarm payrolls to rise 70,000, while the unemployment rate is seen jumping back up to 6.0%. Despite these contrasting trends, S&P thinks the overall theme should still be improvement in the job market compared to conditions earlier in the year.
After the market close Tuesday, chipmaker AMD said that it expects second quarter sales of $600 million, vs. its previously projected sales of $620 million to $700 million, because of weakness in the PC market.
A slew of other companies warned that earnings or revenue will be below estimates, including Polycom (PLCM), Quadramed (QMDC), Openwave Systems (OPWV), and Concord Communications (CCRD).
French media giant Vivendi Universal (V) continued to slide on fears about its finances. Standard & Poor's lowered its credit rating on Vivendi yesterday from BBB to BBB-, the lowest investment grade, and said it may trim it further amid strong concerns about the company's near-term financial liquidity. In the coming weeks, Vivendi will meet with its lender banks and renegotiate its short-term credit lines, says S&P. The ratings agency also noted that a few European and American investment banks have material holdings of Vivendi shares.
Meanwhile, Vivendi's board is getting ready to pick a successor to ousted CEO Jean-Marie Messier.
In the latest in the troubled telecom world, IDT (IDT) is reportedly planning to bid $5 billion for WorldCom's (WCOME) phone business. WorldCom shares will be delisted from the Nasdaq Friday. In the meantime, Justice Dept. investigators are analyzing events leading to last week's disclosure of accounting irregularities.
Alcatel (ALA), which cut its 2002 profit outlook last week, were under pressure on concern the credit rating of Europe's largest phone-equipment maker will be cut to junk. The company reportedly says it is able to meet all obligations.
And shares of Martha Stewart Living (MSO) fell about 7% after Martha Stewart canceled today's regular appearance on the CBS "Early Show" after the network said it would ask her more questions about the December sale of ImClone (IMCL) shares.
Treasuries closed near unchanged levels. Other than another bout of stock indigestion, it was mostly a featureless consolidative session and a set-up for payrolls on Friday, says S&P MMS.
In economic news Wednesday, U.S. factory orders rose 0.7% in May from an upwardly revised 0.7% gain in April (+0.4% initially). Non-defense capital goods orders and shipments were both strong, up 4.3% and 1.2%, respectively. This report was stronger than expected, but didn't garner that much attention.
In addition, the ISM non-manufacturing index, a measure of activity in the services sector, fell to 57.2 in June from a slightly upwardly revised 60.1 in May (from 60.0). The index was weaker than expected, but has held above the critical 50-threshold for five of the last six months, reflecting the improving trend in the economy. The latest report said that businesses were "cautiously optimistic" and the fairly damp-to-mixed data reflects this, says S&P MMS.
European stock markets fell amid worries that corporate accounting problems found at Vivendi will be revealed throughout Europe. In London, the Financial Times-Stock Exchange 100 index ended down 154.20 points, or 3.39%, to 4,392.60 on some mixed economic data.
France's CAC 40 lost 112.33 points, or 3.01%, to 3,623.33. Germany's DAX index declined 57.80 points, or 1.38%, to 4,138.15. There was little reaction to economic reports.
Asian markets ended higher. In Japan, the Nikkei 225 index gained 189.98 points, or 1.79%, to close at 10,812.30, driven by gains in bank stocks. Nikkei news that a private panel of ministers for the Financial Service Agency presented in a draft report two ways of employing public funds to resolve the non-performing loan problem attracted buyers to bank shares.
In Hong Kong, the benchmark Hang Seng index gained 87.43 points, or 0.83%, to close at 10,579.19.