U.S. stocks surge on better-than-expected earnings

CBS MarketWatch ^ | October 15, 2002 | Julie Rannazzisi

[Bubba_Leroy]

Equity investors were in no mood to take a break after three consecutive days of advances. Buyers, in fact, invaded Wall Street for yet another session on Tuesday, dealing the Dow a 3.1 percent advance and the Nasdaq a 3.6-percent gain.

All but three of the Dow's 30 components traded higher, with better-then-expected results from Dow components General Motors and Citigroup fueling the buying interest.

With so much earnings gloom priced into the market during the treacherous third-quarter pre-announcement period, strategists believe companies' actual reports will be greeted with a sigh of relief by investors.

"Such bad news has been discounted, that almost anything will qualify as 'good news' from some companies. This is more a near-term story, and [has] nothing to do about the sustainability of earnings into 2003, overly optimistic earnings hopes for next few quarters, or what sort of revenue/cost cutting pressures remain," commented RBS Greenwich Capital's Peter McTeague.

With the exception of gold, all market sectors were awash in green. Tech favorites included chip and hardware stocks while broad market buyers sought out shares in the retail, airline, bank, biotech and auto groups.

The Dow Jones Industrial Average (CBOT:^DJI - News) surged 243 points, or 3.1 percent, to 8,121, buoyed by Citigroup, J.P. Morgan Chase, Home Depot, American Express, General Motors and IBM. Only Coca-Cola, Johnson & Johnson and Procter & Gamble ticked lower.

The Nasdaq Composite (NasdaqSC:^IXIC - News) soared 44 points, or 3.6 percent, to 1,264 and the Nasdaq 100 Index (NasdaqSC:^NDX - News) jumped 33 points, or 3.7 percent, to 934.

The Standard & Poor's 500 Index (CBOE:^SPX - News) rallied 3.1 percent while the Russell 2000 Index (CBOE:^RUT - News) of small-capitalization stocks piled on 2.9 percent.

Volume totaled 386 million on the NYSE and 466 million on the Nasdaq Stock Market. Market breadth was tremendously positive, with advancers trouncing decliners by 23 to 6 on the NYSE and by 21 to 6 on the Nasdaq.

International equity markets also posted considerable gains, led by Japan's Nikkei Index overnight and by France, Germany and the United Kingdom in Europe. Read Europe Markets.

Biggs: Important bottom but not a new bull Morgan Stanley's well-known global strategist Barton Biggs believes the rally that began in the U.S. last week has many of the technical characteristics that suggest it "marks an important bottom."

But Biggs said it'll take a "few more days to confirm the market is "out of the woods."

"I suspect the rally could carry further than many think, but I view it as a rebound back toward the middle of the trading range, not the start of a new bull market," he told clients in a research note.

John Roque, senior vice president at Arnhold & S. Bleichroeder, still believes we're in a bear market and does not think the action from last Thursday to date signals that "it's over." He said the market breadth numbers have been good, but still not good enough to encourage him.

"There are still a ton of bad charts that need major repair and don't figure that it will happen in a 'V' bottom scenario. That said, we believe last week's move can extend higher and look for the S&P 500 to work to its 50-day moving average next (currently 876) but don't believe it will work above the 910 level without some consolidation," the strategist said, adding that every rally since October 2000 has seen the S&P move to, or just above, its 50-day moving average.

Roque feels the "best thing" that can happen to stocks is a sideways move as he thinks another sharp leg higher would produce a game of "chasing stocks" -- which he views negatively.

Financials fly after Citi, BAC and Schwab results A better-than-expected profit from operations from Citigroup, a bellwether among financial stocks, helped to stoke investor interest in the bank sector. The Dow component (NYSE:C - News) managed to best Wall Street's expectations in its third quarter thanks to strength its it consumer business and aggressive cost-cutting efforts. See story. Merrill Lynch analyst Judah Kraushaar said Citi continues to post strong results despite its legal and regulatory issues.

Shares of Citi headed 7.5 percent higher, infusing the entire financial sector with a positive tone. Fellow Dow component J.P. Morgan rose 7.5 percent ahead of its profit report on Wednesday while American Express surged 5.8 percent.

Bank of America (NYSE:BAC - News) also helped with its 5.8-percent gain after reporting a third-quarter profit that handily surpassed Wall Street's projections. Among the regional banks, Bank One (NYSE:ONE - News) reported an in-line third-quarter profit and saw its shares rise 4.4 percent.

And home mortgage financing titan Fannie Mae (NYSE:FNM - News) cruised past Wall Street's targets in its third quarter while also indicating that 2002 earnings growth would be above the long-term trend. The stock ascended 3.8 percent. See story.

Among the brokers, Charles Schwab (NYSE:SCH - News) reported an in-line third-quarter profit and said opened 160,000 new accounts in the period, up 3 percent. The stock cruised 7.9 percent higher.

GM rally aids Dow Dow stock General Motors (NYSE:GM - News) rallied 5.8 percent after reporting third-quarter earnings that bested the Wall Street consensus estimate. Additionally, the automaker upped its outlook for next year. Rival Ford put on 5.8 percent. Read story.

But drug behemoth Johnson & Johnson (NYSE:JNJ - News) shed 0.3 percent, erasing earlier gains, after checking in with a better-than-expected third-quarter profit.

Airline issues took off, propelled by the quarterly results of Delta Air Lines (NYSE:DAL - News) , which tallied a 10-percent gain after posting a much narrower-than-expected third-quarter loss that was also smaller vs. the year-ago period. Among other stocks in the group, Continental flew 9.5 percent and AMR Corp. 11.2 percent.

Check Movers & Shakers for the latest individual stock action.

Treasurys tumble Government bonds, which were shuttered in observance of the Columbus Day holiday on Monday, began the new trading week on an extremely downbeat note, adding to the mammoth losses posted late last week amid a galloping equity market.

The 10-year Treasury note slid 1 1/8 to yield (CBOE:^TNX - News) 3.94 percent while the 30-year government bond plunged 1 19/32 to yield (CBOE:^TYX - News) 4.915 percent.

The yield on a bellwether 10-year note has risen about 11 basis points since the start of the month.

On the data front, businesses inventories fell 0.1 percent in August, the first decline in four months vs. expectations for a 0.1 percent increase, according to economists surveyed by CBS.MarketWatch.com.

The week's main data consists of the September industrial production and capacity utilization figures, the October Philly Fed Index and the September consumer price index.

In the currency sector, the dollar followed stocks higher, rising nicely against its major rivals. The greenback put on 0.4 percent to 124.76 yen while the euro declined 0.6 percent to 98.14 cents.

[Bubba_Leroy]

I just hope the rally can hold out through the election. It will sure put a damper on the democRATs "It's the economy, stupid" rallying cry.

[rintense]

Good news about the earnings. The company I work for had it's first profitable quarter in a long time.

[steveegg]

While I hope the same, I'm reminded of this old saw:

Wish in one hand, <expletive deleted> in the other; see which one fills up first.

[steveegg]

Even better; I doubt that they cooked the books to come up with that profit.

[rintense]

Nope, they signed that letter and sent off the report!

[Hillarys Gate Cult]

If this rally keeps up a good stock to buy would be Kimberly-Clark. They make "Depends" which the Democrats will need plenty of because talking down the economy is the only issue they have.

[Cicero]

Hee hee. The liberal media and politicians are desperately trying to talk the market down before the election, because it's their only chance to take voter's minds off Bush and the war effort.

Let's hope this rally lasts for the next three weeks. Japan was up 3%, too, this morning, and European markets were up 3-6%. Beautiful.

[steveegg]

Pinging rohry to a hot stock tip.

[for-q-clinton]

Even better; I doubt that they cooked the books to come up with that profit.

The RATs have once again outsmarted us and there's nothing we can do, but watch our country die. When we're in power they will screem corruption, so we'll enforce the laws and not allow people to cook the books. When the RATs get in power, they allow people to cook the books, which makes them look like they're better for the economy. Rinse & repeat. Eventually, our system will be all screwed up.

[steveegg]

There is one way to break that cycle...

THanks for the graphic, MeeknMing

[Quilla]

After listening to Neal Boortz yesterday, I see they are using the "rinse & repeat" model for their new economic plan as well.

1. Refund taxes never paid (in other words - cash grants) to lower and middle class earners.

2. Fund above grants from tax increases of higher earners.

BTW, I absolutely love your screen name.

[steveegg]

You should have put the scare quotes around the "new economic plan" <VBG>

That's the same tripe they've been trotting out the last 65 years. Damn, that reminds me; SocSecurity needs to be retired because it qualifies for its own program.

[GraniteStateConservative]

I didn't know you worked for a corporation, RWP.

[rwfromkansas]

Pray for the stocks......

While this is not the determining factor in teh election, when the Rats try the economy line (so late in the game it might not have much of an impact anyway), the GOP can simply say, look at the stocks surging.

[GraniteStateConservative]

BTW, are you sexing up your RWP persona with this image?

Hoping Colby from Survivor becomes a FReeper and checks out that banner on your profile page and proposes on the spot?

: )

[rintense]

Sexing up? HAHAHAHAHAA! No, that was created for all the malcontents. That's a typical 'look' from me. And yep, I am a corporate worker. *SIGH* Someday they will create a job where I can work from either a golf cart or a beach chair.

[LS]

This has to be wrong. Don't you know the economy is in the crapper? Isn't it time to buy gold? (sarcasm off).

[steveegg]

Isn't it time to buy gold?

I'd stay away from the gold market unless you have a way of protecting it.

[GraniteStateConservative]

You can be in a Corona ad someday tossing your cellphone into the ocean from your beach chair.

Oh, and don't feel bad about my misinterpretation of your intentions with the image. Many girls just can't pull angry off. They just look cuter/sexier.

: )