Stocks closed solidly higher on Thursday. Apr. 19, in a continuation of Fed-spawned euphoria following a surprising inter-meeting 50 basis point rate cut on Apr. 18.
Technology issues continued to set the pace. The only spots of weakness remained defensive issues such as drugs, oil, tobacco and utilities. Market sentiment was surprisingly positive, with indexes following a wildly bullish day Apr. 18 with more upside movement. Earlier this year, one-day rallies had been followed by profit taking in the next session. That didn't happen in this session, giving bulls no small measure of encouragement.
The Dow gained 77.75 points, or 0.73%, to close at 10693.58. The Nasdaq Composite index added 102.59 points, or 4.93%, to 2182.03. The broader S&P 500 finished up 15.53 points, or 1.25%, to 1253.69.
"Today is really a confirmation of yesterday's terrific move," says Arthur Hogan, chief market analyst at Jefferies & Co. "I think it's a real testament to the fact that this market is a lot healthier than it was a month ago."
The weakness in certain "defensive" names is unsurprising. Oil drilling, drug, and tobacco issues had benefited from the woes in the technology sector as money rotated into their direction as investors sought safe havens. A lot of money had made that move to the flight of safety and that rotation is now reversing itself as investors start to buy tech and telecom once again.
Joseph Barthel, chief investment strategist, Fahnestock & Co. is bullish in the near-term, however, despite a less than stellar morning. "It's pretty classic action that once you have a big, explosive move like you had yesterday that the market has a tendency to sort of stall and ultimately just drift moderately higher," he says. "So I wouldn't be too concerned over what we're seeing here."
However, skepticism remains as to the legitimacy of the recent market gains as analysts cite mutual-fund cash positions being too high compared with historical market bottoms and continued high price-earnings ratios, especially within the technology sector.
There's little doubt, however that there will be bumps in the road for the market. On Mar. 22, the Dow was flirting with 9100, now with today's close, it's nearing 10,700- all within a month, which could lead to some profit taking in the near term. And then there's corporate earnings, which continue to flood the market. "We have some major reports coming out after the close (Microsoft and Sun) and we've got a couple of busy weeks of earnings," Hogan says. "And all of those is going to bring with that its own sort of micro-fears and concerns about the future."
Treasuries ended lower as continued strength in the stock market has equities looking more attractive. The curve steepened dramatically on the Fed's rate cut, and looks to continuing its widening. However, after Wednesday's huge gains, we could see some consolidation.
Stocks in the News
IBM (IBM ) reported that net rose 15% in the first quarter, meeting Wall Street forecasts, on strong 8.9% sales growth.
Hewlett-Packard (HWP ) said it will cut 3,000 management jobs and take at least $150 million in write-offs as it warned of a profit shortfall: WSJ.
Apple Computer (AAPL ) posted $0.11 vs. $0.64 Q2 EPS from operations on a 26% revenue decline. The company also says it sees $3.2 billion to $3.4 billion in fiscal second half revenues and sequential improvements in revenues and profits in Q 3, Q4.
Advanced Micro Devices (AMD ) posted $0.37 vs. $0.55 Q1 EPS on a 9% sales rise. The company says Q2 revenue could be down 10% from Q1, but confirms the Street's 2001 $1.50 estimate.
London's Financial Times-Stock Exchange 100 index closed off 18.60 points, or 0.32%, to 5871.60 in profit taking. In Germany, the DAX Index added 17.03 points, or 0.28% finish the session at 6181.91. In France, the CAC 40 ended down 25.03 points, or 0.45%, to 5480.05.
Asian markets ended higher. In Tokyo, the Nikkei gained 226.49 points, or 1.66%, to close at 13868.28. Meanwhile, in Hong Kong, the Hang Seng added 576.15 points, or 4.44%, to end at 13548.95
The Federal Reserve is getting more worried about the economy. Investors figure that means everything will work out fine: NYT.
Five big U.S. airlines posted first-quarter losses, hurt by a drop in business travel, higher fuel costs, and labor and weather problems: WSJ.
U.S. regulators are expected to approve a rule change that will allow Viacom to own both the CBS and UPN networks: WSJ.
Averting a collapse of talks over a spy plane collision, the top U.S. negotiator said the Chinese had agreed to discuss the return of the American aircraft involved in the crash: WSJ.
By Alan Hughes in New York