NEW YORK (CNNfn) - The Dow Jones industrial average gained for the fifth straight session Thursday as investors shifted money into drug and financial sectors.
The Nasdaq composite index waffled for most of the session as personal computer makers came under pressure after a negative outlook from Prudential Securities for IBM and Dell Computer. But the index still managed to eke out a gain for the day, its fourth in five sessions.
"All the focus is on the blue chips but there's renewed optimism," said Charles Payne, head analyst with Wall Street Strategies. "People are using these opportunities to buy these stocks on weakness, and what investors are starting to learn is it's a selective process. You want to participate but you want to be cautious."
And one trader said many market participants were not active this week so he would be hard pressed to place too much significance on the day's action.
"I wouldn't make too much out of it because a lot of players are out this week," said Peter Coolidge, senior trader with Brean Murray & Co. "I think money is starting to go back into the market and you're just seeing a little bit of stabilization, which is good."
The Dow rose 65.60 to 10,868.76. The Nasdaq advanced 18.34 points to 2,557.69. The S&P 500 edged up 5.29 to 1,334.21.
The sloppiness on the Nasdaq reflected Wall Street's nervousness as 2000 -- one of the worst years for stock investors in recent memory -- limps to a close. Bargain hunters tentatively stepped back in but one analyst said investors should proceed cautiously.
"While bargain hunters are going to work, the market is still suffering from a low level of consumer confidence," said Alan Ackerman, senior vice president with Fahnestock & Co. "I'd be in no hurry to pull the trigger and be a buyer at the moment but I would be building a buy list."
Larry Wachtel, market analyst with Prudential Securities, agreed, telling CNNfn's market coverage that expectations for a fresh round of earnings warnings early next year could make early 2001 a tough time for the markets. (395K WAV) (395K AIFF).
But Linda Jay, NYSE trader at RPM Specialists, disagreed. (470K WAV) (470K AIFF)
Market breadth was positive. On the New York Stock Exchange advancers beat decliners 2,109 to 833 as more than 1.01 billion shares were traded. Winners outpaced losers on the Nasdaq 2,587 to 1,485 as more than 2.17 billion shares changed hands.
In other markets, Treasury securities fell. The dollar rose against the euro and yen.
Drugs and financials boost blue chips
Buying in the drug and financial sectors gave the Dow a boost as investors sought safe havens for their money in anticipation of a January rally.
"Everyone is playing defense, so a lot of money is going into cyclicals," said Brian Finnerty, head of Nasdaq trading with C.E. Unterberg, Towbin.
Among pharmaceutical issues, Merck (MRK: Research, Estimates) gained $2.06 to $94.75, Johnson & Johnson (JNJ: Research, Estimates) jumped $1.75 to $104.75. In the financial sector, J.P. Morgan (JPM: Research, Estimates) rose $1.38 to $173 and American Express (AXP: Research, Estimates) advanced 81 cents to $54.
Technology stocks weren't able to reap the same benefits.
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PC makers were hurt by revenue warnings from Prudential Securities about two computer makers, IBM and Dell.
"The PC business looks like it's going to be struggling for most of next year," Drew Peck, semiconductor analyst with SG Cowen, told CNNfn's Before Hours. "If you look a little bit outside the PC world and look at some of the things that are going on in the consumer and industrial sectors, looks to me like there is going to be a nice rebound coming."
IBM's fourth-quarter revenue outlook was reduced to $24.5 billion from $25.3 billion and Dell's fourth-quarter projection was shaved to $8.29 billion from $8.38 billion.
The warnings had more effect on IBM's (IBM: Research, Estimates) rivals than on Big Blue itself, which gained 56 cents to $85.25. Dell (DELL: Research, Estimates) shares dropped 6 cents to $17.94, and Sun Microsystems (SUNW: Research, Estimates) shed $1.44 to $28.94.
And other tech leaders fell amid renewed concerns about further disappointments and inventory worries, said analysts.
Cisco Systems (CSCO: Research, Estimates) fell $1.19 to $39.56 and Intel (INTC: Research, Estimates) shed $1.69 to $30.88.
Investors watchful of economy
Investors are hoping that the Federal Reserve will move to cut interest rates when its policy-making arm, the Federal Open Market Committee, meets in January as consumer confidence continues to fall.
"With the confidence levels as weak as they are, it would be a mistake for the Fed not to cut [rates] as soon as possible," said Fahnestock's Ackerman.
And investors continued to eye incoming economic data. The December Consumer Confidence Index fell to 128.3, the lowest level in two years, according to the Conference Board, a private research group. The figure is close to the consensus forecast of 128.0, according to Briefing.com, which surveys economists.
Separately, existing home sales rose to an annual rate of 5.22 million in November, the National Association of Realtors said, slightly above forecasts.
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