Posted on 06/27/2002 1:57:06 PM PDT by jae471
Thursday June 27, 4:44 pm Eastern Time
Reuters Business Report
Stocks Rise; Data Soothe Raw Nerves
By Haitham Haddadin
NEW YORK (Reuters) - Stocks raced to their biggest gains in almost two weeks on Thursday, as raw nerves about the WorldCom accounting scandal were soothed by a government report that the U.S. economy grew faster than previously thought.
Investors snatched up beaten-down shares after weeks of selling had put stocks at multi-year lows, and this gave the bulls firm control of the market late in the session after a tug of war with worries of more accounting chicanery in Corporate America in the wake of phone company WorldCom Inc.'s (Nasdaq:WCOME - News) admission it inflated results by $3.85 billion.
Jitters about corporate wrongdoing were reignited in mid-morning trade when rumors of accounting irregularities swirled around General Motors (NYSE:GM - News) after trading in the auto giant's shares was halted for an order imbalance. The company denied the rumors and said its bookkeeping was sound.
"The market was hit by this GM story which appears to be a fabrication by some short-sellers, and we recovered that loss," said Tim Anderson, stock trader with Salomon Smith Barney. "The market will be in a tug of war here for a couple of days as we deal with the end-of-quarter portfolio balancing."
The key semiconductor sector carried technology stocks higher, boosted after Lehman Brothers raised its rating on the group. Another Wall Street house, Bear Stearns, said it believes the semiconductor equipment makers group was "oversold," Street-speak for possible bargains.
The Dow Jones industrial average (CBOT:^DJI - News) jumped 149.81 points, or 1.64 percent, to 9,269.92, according to the latest available data. The broader Standard & Poor's 500 Index (CBOE:^SPX - News) was up 17.11 points, or 1.76 percent, at 990.64. The technology-laced Nasdaq Composite Index (NasdaqSC:^IXIC - News) rose 29.89 points, or 2.09 percent, to 1,459.22.
The government said the economy raced ahead at its fastest clip in more than two years in the first quarter, up from earlier estimates, amid better-than-expected consumer spending and business investment. Another report showed the number of people signing up for jobless claims fell last week, providing more evidence of a modest improvement in the economy.
"These numbers support the view that the economy is on a recovery path," said Richard Cripps, chief market strategist at Legg Mason Wood Walker. "What has been holding the market back are these confidence issues, and to the extent that that is nursed, the market should move higher."
The S&P semi equipment index (^GSPTKSM - News) was at the top of the list of the sectoral gainers, up 4.34 percent, and the Philadelphia semiconductor index (Philadelphia:^SOXX - News) was up 3.09 percent.
Lehman hiked its rating on a number of firms in the chip-making sector, like Micron Technology Inc. (NYSE:MU - News), which rose $1.50 to $20.50, and Integrated Circuit Systems Inc. (NasdaqNM:ICST - News), up $2.24 at $20.24.
Bear Stearns told clients in a note: "We still think the semiconductor equipment stocks in general are oversold.".
It recommended investors aggressively buy shares of Amkor Technology Inc. (NasdaqNM:AMKR - News), saying they were selling for just a bit more than half their year-low price following the Sept. 11 attacks on the United States. Amkor bolted more than 12 percent higher at one point, and ended up 45 cents at $5.66.
The market hit session lows on the GM talk, but then swiftly trimmed its losses. GM later said it is not being investigated and that its accounting is sound.
GM's shares dipped as low as $50.77 but trimmed their losses to close down $1.58 at $51.50.
Among big movers, Pfizer Inc. (NYSE:PFE - News) rose $1.75 to $36.75, or 5 percent. The world's largest drugmaker said it will explore options including the possible sale of two consumer product lines, and set a $10 billion stock buyback.
"Pfizer's $10 billion share buyback is good news," said Ahmet Okumus, president of Okumus Capital, which manages $520 million. "We are also hitting a wall of (technical) support and also today is the day before the last day of the month and there's not that many negative corporate pre-announcements.
"In technology, you see the lowest valuations in price to sales in names that have earnings."
Top chipmaker Motorola Inc. (NYSE:MOT - News) rose after it said it will cut 7,000 more jobs to reduce costs and that it expects to take charges of about $3.5 billion, but affirmed its operating-earnings forecasts for the second quarter and full year. Shares rose 41 cents to $14.45.
The market's dip earlier illustrated its nervousness amid a string of accounting scandals -- the latest of which came after WorldCom disclosed it had improperly booked expenses of $3.85 billion, rocking world markets Wednesday.
Among big losers were advertising and media companies.
WorldCom's accounting scandal may dampen telecom advertising spending, but analysts said no single U.S. advertiser had major exposure to the phone giant.
Interpublic Group of Cos. Inc. (NYSE:IPG - News) fell $1.76 to $23.51 and Omnicom Group Inc. (NYSE:OMC - News) $4.51 to $44.30,
Omnicom was also taking it on the chin after Moody's Investors Service said it may cut the company's rating, due to the weakened and somewhat uncertain advertising market.
Clear Channel Communications (NYSE:CCU - News) said there were no accounting issues or irregularities at the top U.S. radio broadcaster and that there was no investigation of the company. The company issued a statement to ease concerns swirling on Wall Street. Still, its shares dropped $4.55 to $31.20.
Banking stocks firmed after being pummeled in the prior session on worries banks with loans to WorldCom would take a hit. J.P. Morgan Chase (NYSE:JPM - News) rose $1.23 to $32.72, while Citigroup (NYSE:C - News) rose $2.16 to $39.16. Both helped the Dow.
Qwest Communications International (NYSE:Q - News), slapped lower in the prior session amid fears it could be caught up in troubles similar to WorldCom's, snapped back sharply after saying it was cooperating with the Securities and Exchange Commission. Its shares soared 97 cents, or 54 percent, to $2.76.
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