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Markets & Stocks
Triple-digit rally on Dow
January 30, 2001: 4:46 p.m. ET

Investors pour money into blue chips amid hopes of aggressive Fed rate cut
By Staff Writer Catherine Tymkiw
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NEW YORK (CNNfn) - The Dow Jones industrial average surged nearly 180 points Tuesday, as investors poured money into the blue chips amid the belief that the Federal Reserve may cut rates more aggressively than previously anticipated.

As the Fed's two-day monetary policy meeting reached the halfway point Tuesday, most market watchers still expected the Fed to cut interest rates by a half-percentage point. But some analysts say investors are starting to believe a rate cut, set to be announced Wednesday afternoon, could be even greater.

"There's a lot of pre-Fed buying," said Barry Hyman, chief market strategist at Weatherly Securities. "There's this insane belief that the Fed's going to move more than a half-point and that's what's powering the Dow, because you have a lot of cyclicality in that index and they are certainly beneficiaries of any severe interest rate cut."

And an economic report signaling a sharp drop in consumer confidence also seemed to bode well for a rate cut.

graphic"A lower interest rate cycle is under way and lower interest rates are likely to prompt more money into the markets," said Alan Ackerman, senior vice president with Fahnestock & Co. "For now it appears to be a 'safety first' posture, so we're seeing money rotating into better blue chip names that are more predictable in terms of earnings flow."

The Dow gained 179.01 to 10,881.20. The blue chip index is now up 0.8 percent for the year and only 64 points shy from its high for the year, reached when the Fed surprised the market with a half-percentage point rate cut Jan. 3.

The Nasdaq composite index was virtually unchanged, edging up a mere 0.01 to 2,838.35, while the S&P 500 tacked on 9.56 to 1,373.73.

graphicWhile trading activity in tech issues was sluggish, Procter & Gamble broke out early to lead the Dow's rally. Explaining some of the strength, Charles Payne, head analyst at Wall Street Strategies, said, "Interest rate cuts really do help consumer stocks pretty quickly, and it was a case of expectations dropping so low on the company that people were able to take something good out of (Procter & Gamble's) report."

Market breadth was positive. On the New York Stock Exchange, advancers beat decliners 1,866 to 1,246, as more than 1.13 billion shares were traded.  Winners beat losers on the Nasdaq 2,148 to 1,651, as more than 1.96 billion shares changed hands.

In other markets, Treasury securities rose. The dollar fell against the euro and the yen.

Dow rallies

As money left tech stocks, investors displayed confidence in consumer cyclicals which sent the Dow soaring. These issues are seen as reaping immediate gains from an aggressive rate cut. DuPont (DD: Research, Estimates) jumped $2.25 to $43.24, 3M (MMM: Research, Estimates) surged $4.11 to $111.40, and General Electric (GE: Research, Estimates) gained $1.87 to $46.25.

But investors were not as enthusiastic about technology stocks. Major tech issues were mixed. Cisco Systems (CSCO: Research, Estimates) gained 75 cents to $38 and Applied Materials (AMAT: Research, Estimates) jumped $2.25 to $52.44, while Microsoft (MSFT: Research, Estimates) shed $1.13 to $63.38 and Sun Microsystems (SUNW: Research, Estimates) fell $1.50 to $32.06.

graphicAnd Amazon.com (AMZN: Research, Estimates) shed $1.19 to $18.94. The online retailer posted its fourth-quarter results after the market closed. Amazon lost 25 cents a share, a penny narrower than expected. But the company also said it would cut its work force by 15 percent.

Focusing on the Fed

The Fed meeting got under way with most people expecting a half-percentage point cut while remaining hopeful the Fed will signal more may come, especially with mounting evidence that the economy continues to weaken.

Those signs -- including thousands of job cuts at some of the nation's biggest companies -- prompted the central bank to cut short-term rates by a half-percentage point earlier this month in a bid to ward off a recession. If there is a rate cut, it isn't expected to be announced until Wednesday afternoon.

graphic"The Fed obviously will make some move and I do think the economy has already slipped into recession," Kathleen Camilla chief economist with Tucker Anthony, told CNNfn's Before Hours.

Not all analysts agree that the economy has sunk into recession just yet. "I think we have a recession in the manufacturing sector but the broader economy is OK," said Art Hogan, chief market analyst with Jefferies & Co. "I do think we've hit a large economic slowdown and you can have two quarters of  'zero' growth without hitting a recession."

But the day's economic news did little to inspire confidence.

A widely watched measure of consumer strength, the Consumer Confidence Index, fell for a fourth straight month in January, this time sharply. The index dropped to 114.4 from 128.6 in December, according to the Conference Board, a private research group.  Analysts surveyed by Briefing.com expected confidence to fall only to 124.5.

"Historically, these types of declines haven't really been bad news for the market because they force the Fed to take action," said Wall Street's Payne.

Former Fed governor Robert Heller suggested policy makers could get even more aggressive. "If you look forward you have to turn consumer confidence around to keep the economy on an even keel," he told CNNfn's Market Call. "In a zero-growth environment, you need action now. Anything you provide later on is too little too late."(178K WAV) (178K AIFF)

Procter & Gamble surges

Investors continue to digest corporate results and guidance to gauge how profitable these firms will be as the year progresses.

Procter & Gamble reported Tuesday that earnings rose 4 percent in the latest quarter excluding one-time items, coming in a shade above Wall Street forecasts. Shares of Procter & Gamble (PG: Research, Estimates) jumped $4.25 to $71.10.

  graphic QUARTERLY RESULTS  
    Click below for a comprehensive look at today's earnings
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    Finland's Nokia (NOK: Research, Estimates), the world's biggest mobile phone maker, tumbled $1.71 to $35.28 after it warned that sales growth for the first three months of 2001 would slow. But it reported a 41 percent increase in fourth-quarter earnings.

    Insurance provider Aetna reported fourth-quarter operating income Tuesday that was sharply lower than a year earlier, but four cents a share higher than Wall Street estimates, on lower revenue. Aetna (AET: Research, Estimates) shares slid $1.05 to $38.95.

    graphicUnited Parcel Service  (UPS: Research, Estimates) which has been hurt by the impact of a slowing U.S. economy on its domestic package delivery volume, reported a quarterly profit that was slightly above lowered Wall Street expectations. UPS shares advanced 80 cents to $61.60 after posting a profit of 63 cents a share, up from the 56 cents a share earned a year earlier. graphic





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    Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.