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Dow powers ahead
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February 1, 2001: 5:02 p.m. ET
After drifting all morning, blue chips rally toward finish; Nasdaq edges up
By Staff Writer Jake Ulick
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NEW YORK (CNNfn) - The Dow Jones industrial average rose to its highest level in more than four months Thursday as investors bet the Federal Reserve's latest interest rate cut, coupled with more to come, will be enough to re-ignite a faltering economy.
With a big, half-percentage-point rate reduction on Wednesday -- the second in a month -- the central bank signaled a readiness to keep a decade-long expansion on track.
"The Fed is our friend," Jon Burnham, chairman and CEO of Burnham Securities, told CNNfn's market coverage. "They are going to reduce interest rates by as much as they need."
 But the latest data suggest there's more work to do. A key gauge on the manufacturing sector fell for a sixth month Thursday. Stocks initially fell on the news as investors debated how long it will take to turn the economy around
"Obviously, we are still concerned about how much the economy is slowing going forward," Art Hogan, chief market strategist at Jefferies & Co., told CNNfn's market coverage. "There are a lot of people who aren't making bets on this marketplace."
Blame some of that reluctance on Friday's jobs report for January. If economists are right, the week's most closely watched economic indicator will show the labor market weakened once again last month. Still, by session's end the Dow jumped nearly 100 points. And the Nasdaq composite index, which rallied last month, edged higher.
The Dow rose 96.27 points, or nearly 1 percent, to 10,983.63, its highest close since Sept. 14, when the index finished at 11,087.47.
 The Nasdaq advanced 10.06 to 2,782.79 while the S&P 500 index gained 7.46 to 1,373.47.
Market breadth was mixed. Advancing issues on the New York Stock Exchange beat declining ones 1,715 to 1,385 on trading volume of nearly 1.2 billion shares. Nasdaq losers beat winners 1,972 to 1,816. More than 1.6 billion shares changed hands.
In other markets, Treasury securities rose for the third straight day. The dollar fell against the euro and yen.
Digesting a rate cut
Economic indicators continue to show surprising weakness. In the latest, the National Association of Purchasing Management said its index of manufacturing activity fell to 41.2 percent in January. The sixth straight monthly decline was well below the 43.8 percent figure expected by Wall Street.
The NAPM index's last decline came one day before the Fed made a surprise, half-percentage point rate cut. With Wednesday's rate cut, the Fed signaled that more reductions could be ahead.
 Lower borrowing costs typically lift stocks, but many shares rose ahead of the central bank's widely expected decision. The Nasdaq rose more than 12 percent in January. Any gains for tech stocks, some analysts say, could take time.
Still, several Dow stocks staged a late rally. SBC Communications (SBC: Research, Estimates) rose $2.20 to $50.55, Merck (MRK: Research, Estimates) advanced $2.30 to $84.48 and Procter & Gamble (PG: Research, Estimates) jumped $2.11 to $73.95.
But tech stocks made few dramatic moves. On the Nasdaq, Oracle (ORCL: Research, Estimates) gained 94 cents to $30.06 while Dell Computer (DELL: Research, Estimates) fell 19 cents to $25.94.
After hiking rates six times through last May, the Fed, many believe, is now ready to aggressively reduce borrowing costs. But some analysts don't see stocks rallying until the second half of the year as the benefits of lower borrowing costs trickle down to consumers.
"I expect we'll see a choppy first half, but by the second half we'll see gains," Jeff Davis, chief investment strategist at State Street Global Advisors, told CNNfn's market coverage.
Telecoms post profits
Following two busy weeks, corporate financial reports for the October-December quarter have slowed.
Among Thursday's, Verizon Communications (VZ: Research, Estimates), the No. 1 local phone service carrier, reported that fourth-quarter earnings rose 77 cents a share from 75 cents a share a year earlier. Its stock gained 5 cents to $55.
But fourth-quarter profit at Sprint (FON: Research, Estimates) fell to 41 cents a share from 49 cents a share a year earlier. Sprint, which still beat forecasts, fell 25 cents to $24.55.
Many companies have had trouble growing profits and revenue as the economy slows. Ford Motor (F: Research, Estimates) said sales of new cars and trucks fell 11 percent in January. Its stock rose 7 cents to $28.26 after hitting a 52-week high above $57 in April. General Motors (GM: Research, Estimates), meanwhile, announced a 5 percent drop in total vehicle sales. GM shares rose 65 cents to $54.35.
Click here for a comprehensive look at the day's earnings
Recent economic data has shown plenty of weakness. U.S. gross domestic product grew at its slowest pace in five years during the last three months of 2000, the government said Wednesday. A day earlier, consumer confidence tumbled to its weakest levels in four years.
And companies including Lucent Technologies, Amazon.com and CNNfn's owner AOL Time Warner have all announced layoffs last month.
 General Electric (GE: Research, Estimates), according to Business Week, will cut about 75,000 jobs, or 15 percent of its work force, over the next two years. GE denied the report. Its shares rose 25 cents to 46.23.
Another economic indicator Thursday supported the trend of layoffs. The number of Americans filling for jobless benefits rose by 32,000 last week to 346,000, the government said. The figure comes one day before the Labor Department issues a more comprehensive look at the job picture.
In it, economists surveyed by Briefing.com expect that the unemployment rate rose to 4.1 percent in January from 4 percent in December. Employers are forecasts to have added 80,000 non-farm jobs last month, a smaller gain than December's 105,000. 
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