CNBC Market Dispatches 10/03/01 12:27 PM ET
Bits of good news lift stocks
The earnings news isn't good, but some encouraging comments and economic news have the market headed higher today.
Stocks are headed higher at midday after an opening dip, with the Dow gaining almost three digits and the Nasdaq pushing past 1,500 for the first time in a week.
The stream of bad news on earnings continues to take a toll, with investors punishing Ford (F, news, msgs), Eli Lilly (LLY, news, msgs) and Nortel Networks (NT, news, msgs), among others.
But investors are also rewarding companies that offer hope for the economy, even while warning. One example: Homebuilder Lennar (LEN, news, msgs) reports that new-home orders are down 22% but notes, "nevertheless, we were encouraged to see that consumers returned to the market and sales rebounded by the end of September." The stock is up 5% today.
"We’ve seen some encouraging comments from a number of companies," says CNBC's Bob Pisani.
The bad news was also muted by a relatively good number from the National Association of Purchasing Management. The industry group’s monthly non-manufacturing index rose to 50.2 in September, indicating slight growth in the service sector after a two-month decline.
Software stocks are leading the Nasdaq up today, with Kronos (KRON, news, msgs) up 24% after guiding financial numbers higher -- a rarity these days. Interwoven (IWOV, news, msgs) was up 38% after a mild earnings warning that led USB Piper Jaffray to upgrade the stock to "buy.”
All told, some of the gloom may be lifting. Since dropping about 15% after the Sept. 11 terrorist attacks in New York and Washington, the Dow and Nasdaq have made up substantial ground. The Nasdaq is now down less than 10% and the Dow about 6%.
Earnings news ups and downs
The market seems of two minds today when it comes to profit warnings. Companies like Nortel Networks and Eli Lilly were punished for bad numbers, but others were being rewarded despite them.
Tiffany (TIF, news, msgs) cut its profit outlook for 2001 this morning and saw its stock rise almost 9%. Williams-Sonoma (WSM, news, msgs) -- that's Pottery Barn, Hold Everything, Chambers and Bed + Bath -- cut its sales numbers but said it still expects to meet earnings forecasts. The company's stock rose 17%.
Does that mean retailers can report safely? Well, consider this: Discounter Family Dollar Stores (FDO, news, msgs) reported a 12.5% rise in fiscal fourth-quarter earnings, in line with Wall Street's estimates, and saw its stock fall 3%.
Reactions in tech stocks seem just as conflicted. Interwoven (IWOV, news, msgs), whose software manages Web content, lowered its third-quarter revenue expectations Tuesday night. On Wednesday, its shares spiked, rising 31%.
But investors punished Openwave Systems (OPWV, news, msgs) and Digital Lightwave (DIGL, news, msgs) after they warned, dropping them 32% and 43% respectively.
But here's one clue: While most companies warning today cite the Sept. 11 terrorist attacks as part of the reason for their slowdown, investors do seem to reward those that can show the slowdown is going to be temporary. One example: Priceline.com (PCLN, news, msgs), which lowered expectations after the attacks, is up some 17% today after reporting that its business is recovering quickly. Travelocity.com (TVLY, news, msgs) was up 11% in sympathy, despite a gloomy analyst report.
One related note: Winnebago Industries (WGO, news, msgs) , which makes those rolling houses, today said its fiscal fourth-quarter earnings rose sharply thanks to new products and lower interest rates. Shares rose some 16%.
So while investors aren't sure about software, we do seem certain Americans will travel again despite the attacks. But instead of flying, maybe we'll hit the road in style.
Vote of confidence
Call it pride or say he's prejudiced, but Michael Dell is pretty big on Dell Computer (DELL, news, msgs) .
An SEC filing notes that he bought 4.3 million shares of his company between Sept. 20 and Sept. 27 for just under $72 million.
-- Ron Prichard