Wall St. Rises on Fed Official's Comments

Yahoo/Reuters ^ | 11/12/02 | Chelsea Emery

[arete]

NEW YORK (Reuters) - Stocks climbed in late-morning trading on Tuesday after a Federal Reserve (news - web sites) official said there is no question the U.S. economic recovery is under way, raising hopes for corporate profits.

Web equipment maker Cisco Systems Inc. (Nasdaq:CSCO) gave technology stocks a boost after the company, seen as a benchmark for the health of U.S. companies, said its order backlog is on the upswing.

"We've got positive comments out of the Fed -- they're talking about the economy and that's what the stock market is worried about," said Tom Schrader, head of listed trading at Legg Mason Wood Walker. Cisco is helping techs "without a doubt," he said.

Expectations that lower interest rates and a business-friendly U.S. Senate will help corporate profits also underpinned gains, a day after shares had tumbled following defiant rhetoric from the Iraqi parliament on a U.N. resolution to disarm Iraq.

"In the very short run, episodic news announcements can give us a bounce," said Jon Brorson, Director of equities at Northern Trust Co. "The market's been thumped in last few days and we're seeing a little bit of buying here."

The Dow Jones industrial average (^DJI) was up 105.77 points, or 1.27 percent, at 8,464.72. The broader Standard & Poor's 500 Index (^SPX) was up 10.95 points, or 1.25 percent, at 887.14. The technology-laced Nasdaq Composite Index (^IXIC) was up 30.43 points, or 2.31 percent, at 1,349.62.

Cisco climbed 56 cents, or 5.4 percent, to $12.81 and was Nasdaq's most-active stock after the company said its backlog was up from September. Analysts use order backlog data to gauge future sales.

Also firing up stocks were comments by Minneapolis Federal Reserve President Gary Stern, who said economic expansion from the fourth quarter of 2001 through the first three quarters of this year has averaged an annual growth rate of roughly 3 percent.

"That is not magnificent for the early stages of an economic expansion, but it is not terrible either, so the economy does appear to be moving ahead. In my judgement there is no question that an economic expansion, an economic recovery, is under way," Stern told the La Crosse, Wisconsin Economic Summit.

The Fed on Nov. 6 slashed its benchmark Fed funds rate by a half-percentage point to 1.25 percent -- a reduction double the size of what most private economists expected. Rates are now at their lowest levels in more than four decades.

In corporate news, Motorola, the No. 2 maker of wireless telephones, rose 40 cents to $8.78 after saying at a telecommunications conference on Monday it still plans to meet earlier fourth-quarter financial forecasts, good news for some investors who have been worried about a slow spending environment.

Oracle Corp. (Nasdaq:ORCL) rose 30 cents to $9.35 after Chief Financial Officer Jeff Henley said he sees a turnaround for the technology industry in 2003, forecasting a return to growth in 2003 following two years of revenue declines.

"During the first half of calendar '03, we'll start to see this thing turn around," he said at an Oracle-hosted technology conference in San Francisco.

[arete]

In my judgement there is no question that an economic expansion, an economic recovery, is under way," Stern told the La Crosse, Wisconsin Economic Summit.

Humm -- so we have 2 Fed officials plus CSCO, MOT and ORCL all saying good things about the economy -- and just happens, all at the same time. We must really be in big trouble.

Richard W.

[arete]

FYI

Comments and opinions welcome.

Richard W.

[imawit]

Richard, you've got to be kidding ? Did I get this right ?Cisco...said its order backlog is on the upswing.

Orders for what ? Paper clips. This is assinine that the market would go up on this. Where's the data, where's the beef ? Prior to this stupid buy factor news release, the overnight showed the markets would be up anyway. And at that time I was questioning why. Duh, I guess I know now order backlogs are up at Cisco. But then why are my stock pix up too ? I don't believe they got any instant future advance orders or may be they did. New technology I'm not aware of maybe.

[Mike K]

We should disregard the fact that no recovery ever began from such a high level of stock valuations, pay no attention to the Japanese who are taking their money out of our markets and bonds, turn your back on the knowledge that Ford and GM make money on financing but not manufacturing, forget about the unprecedented levels of consumer credit defaults, forget that the yield spread between Treasuries and corporate debt is close to a record and getting wider.

Like the dems, we should just drink the Cool Aid. [/sarcasm]

[razorback-bert]

I note CSCO didn't mention any new hiring to fill orders.

That event will signal real recovery.

[imawit]

I've have got to say, at this time with what's going on,....The markets do not come anywhere close to deserving being called investments

This is the biggest three ring snake oil, medecine man, three ring circus I have ever seen.

What time does the next show come on ?

[eastsider]

With the VIX continuing to hover around 35, not everyone is so sanguine.

[arete]

What time does the next show come on?

This sure does look like some kind of coordinated push to keep the market up. Maybe they are afraid that the 1/2 point cut in rates sent people the right message. You don't cut rates that much if there is evidence of an economic recovery. Today's dog and pony show by the FED and the largest tech firms is just more Wall Street flim flam to keep people believing in the illusion of paper assets and an economic recovery.

Richard W.

[steve50]

The only investment I'm looking at is yellow metal, and it's the most manipulated thing in the world. With the possible exception of our perceptions.

[LS]

Yah, TERRIBLE news Richard. Dang, there goes gold again, just when the goldbugs appeared to be getting people hysterical.

Oh, productivity was up last quarter too, a LOT. Gee, bad news everywhere you look. (sarcasm off :)

[LS]

Actually, my broker told me that his info was that all the computer companies were seeing orders to replenish inventories. But what does he know? He must be a government shill, right?

[arete]

That explains it -- Business Roundtable Survey shows CEO' are highly negative on economic growth, jobs, and spending for next year. That is why we had the flim flam operation in the morning. They knew how that was going to be taken. Anything but the truth.

Richard W.

[LS]

Sorry, dude, you can't have it both ways. GM is making profits now without refinancing. This was always the whine about GM---just as you said, "They are making money off money, not cars." As Peter Sellers in the Pink Panther says, "not anymore."

[arete]

You had better check to see what the CEO's are saying rather than listening to the con men. Whenever it gets posted, read the result of the Business Roundtable. Back to reality LS -- back to reality.

Richard W.

[imawit]

I was getting serious on jumping back in again but now I'm seriously pondering getting in at all. The big dogs show an unbelieveable ability to control the market on the short term. The only thing holding them back is the other big dogs in the pack that will take advantage of their play faking.

[imawit]

You've got to come up with something better than this to get me to bite.

[imawit]

reference request. I'm fairly new at paying this close attention to the markets and I was wondering if there was a time you recall seeing such blatant hype and manipulation of the markets.

The real question behind all of this is...what are the big dogs trying to accomplish with all of this. They're going beyond investing to make earnings. No one has addressed this scenario.

[arete]

show an unbelieveable ability to control the market

What is really frightening and disturbing is to see how the "who's who" of the Fed and corporate America seem to be eager and willing participants in scamming the public. Even worse, they seem to be working together in a planned effort. It is so dishonest. The economy is weak, people are losing their jobs and the future doesn't like it is improving. Why can't they just tell the darn truth?

Richard W.

[arete]

Late 90's were almost all hype. You heard it all -- earnings don't matter, it's eyeballs that count. Things are different this time. There has been a repeal of the economic cycle.

I would guess that the end game is to buy time until we can grab Saddam's oil and gold so that there will be some real physical assets to hold up the mountain of paper promises that is getting ready to fall over and crash.

Richard W.

[imawit]

Several observations and questions.

What is trying to be accomplished by the big dogs in the market ? It's not patriotism, re-inflating the bubble back to the historic highs is not possible, making the economy look good for the election might have been a valid case but the election is over...so why continue.

This would be a great discussion thread. There is probably enough intelligence on line to come up with some very good consensus. Could you start something on this vein ?