Stocks staged an impressive comeback in the last two hours or so of trading as semiconductors rallied behind positive comments from National Semiconductor (NSM ) at the Robertson Stephens Technology Conference in San Francisco. This offset a plethora of bad news from the tech sector and earnings woes that had weighed upon the indexes for much of the session.
As far as the market's resilience in the face of bad news, it's a situation where stocks have just stopped going down again on bad news, according to Larry Rice, chief investment officer at Josephthal & Co. "Some of these things have been beaten down so much that 20,000 layoffs don't scare anyone anymore," he says. "These things are down 70-80% and short of bankruptcy it's hard to see them going down any more."
However, the strategist believes valuations in the market remain too high for his liking and that the market bottom lies ahead: "You see more [lingering bullishness] at market tops than bottoms." He believes that if there is "any kind of positive spin on the fourth quarter, I think we'll have capitulation as people will realize [Greenspan] has had seven interest rate cuts and nothing's getting better."
U.S. initial jobless claims plunged 51,000 to a 336,000 level in the week ended July 21. Standard & Poor's MMS says the dramatic drop was likely due to distortions related to the annual auto-retooling, which makes the weekly series difficult to interpret during the month of July. However, continuing claims remain just below a nine-year high at the 2,087,000 level, which is consistent with weaker conditions in the labor market.
Also on the economic front, U.S. durable goods orders tumbled 2.0% in June compared to -1.0% median forecasts, mostly an adjustment from surprising strength last month at 2.7% (downwardly revised from 2.9%). Ex-transportation durables fell by a smaller margin of 1.5% and ex-defense fell by 1.7%.
Among the stocks in the news Thursday, Hewlett-Packard (HWP ) says it expects a 14%-16% third quarter revenue decline, including a 3% negative currency impact. The company plans to cut about 6,000 more jobs, citing global economic woes and weak tech spending, particularly in the consumer sector.
The Dow Jones Industrial Average gained 50.09 points, or 0.48%, to close at 10,455.76. The tech-heavy Nasdaq Composite gained 38.87 points, or 1.96%, to 2,023.19. The broader S&P 500 Index added 12.46 points, or 1.05%, to 1,202.95.
U.S> Treasury issues ended higher in Thursday's session, with shorter-dated issues outperforming. The impetus first came from the latest tech warnings and layoffs (Compaq and H-P), but stocks staged an optimistic late rebound. Then a series of rumors and events drove the outperformance at the front end of the yield curve: Talk of a U.K. insurer going bust and weak U.K. GDP tomorrow which sent short-dated U.K. and euro-zone rate futures higher. A S&P downgrade of Taiwan and a Moody's downgrade on Argentina also kept the global deflation story alive.
European markets closed higher in a rebound from Wednesday's weakness. In London, the Financial Times 100 gained 10.40 points, or 0.20%, to 5,286.10. In France, the CAC 40 Index was up 68.95 points, or 1.44%, to 4,842.12. Germany's DAX Index was up 54.99 points, or 0.99%, to 5,637.75.
Asian markets ended lower. In Japan, the Nikkei lost 33.05, or 0.28%, to close at 11858.56. Trading in Hong Kong resumed Thursday after markets there were closed Wednesday by a typhoon. The Hang Seng Index shed 174.28 points, or 1.43%, to close at 12039.82.
By Alan Hughes in New York