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Stocks drift on Wall St.
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April 20, 2001: 4:29 p.m. ET
After three days of gains, investors cash in but indexes end with weekly gains
By Staff Writer Catherine Tymkiw
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NEW YORK (CNNfn) - U.S. stocks languished Friday as investors cashed in on a stellar three-day rally, opting to take some money off the table ahead of the weekend while quarterly results continued to flood the market.
"After this week, this is to be expected, especially on a Friday – a lot of people want to book profits ahead of the weekend," said Charles Payne, head analyst with Wall Street Strategies.
But the losses were not severe and bargain hunters nibbled at select opportunities. Analysts were encouraged by the underlying strength in light of good -- though not exceptional -- quarterly reports.
"I don't want to be too dramatic about the drop – it's more or less profit taking," said Barry Hyman, chief investment strategist with Ehrenkrantz King Nussbaum. "It's not severe in relation to the magnitude of the rise."
For the week, the major indexes all locked in decent gains, which is a strong sign that market sentiment is indeed turning. For the week, the Nasdaq gained more than 200 points, or 10 percent, the Dow rose more than 450 points, or 4.4 percent, and the S&P 500 advanced 59 points or 4.9 percent.
"I think this week was the week that broke the bear's back," said Payne.
 That belief was affirmed by the modest resiliency in the technology sector that caused the Nasdaq composite index to flip-flop in the early part of the trading session. But drug stocks continued to pressure the Dow Jones industrial average after Merrill Lynch downgraded Merck to "neutral" from "accumulate."
The Nasdaq composite index slid 18.73 points to 2,163.41 -- the tech-heavy index fluctuated about 30 points on either side of breakeven in early trading before succumbing to the sellers. The indicator is still down 12 percent from the start of the year.
The Dow Jones industrial average slipped 113.86 points to 10,579.85. From the start of the year, the blue chip index is down about 5 percent. The Standard & Poor's 500 fell 10.71 to 1,242.98 and is down 5.9 percent from the start of the year.
 "The whole story this week was about maintaining and improving confidence – from the Fed and from Wall Street corporations," said Ehrenkrantz's Hyman. "There's an implicit belief that we have seen a good deal of the worst and Wall Street is still being ultra cautious."
Friday also was a day for options expiration, which added some of the downward bias, but traders said it wasn't the driving force behind the selling.
"I think the market has had an unbelievable run over the past seven days and what you see is profit taking," said Matt Johnson, head of U.S. equity trading with Lehman Brothers. "What's driving the market today (Friday) is what people are doing in the cash market, so it's not options expiration."
Market breadth was negative. On the Nasdaq, losers beat winners 2,038 to 1,841 as more than 2.51 billion shares were traded. Decliners outpaced advancers on the New York Stock Exchange 1,863 to 1,187 as more than 1.31 billion shares changed hands.
In other markets, Treasury securities edged higher. The dollar rose against the yen but slid versus the euro.
Fed moves lift sentiment
The string of interest rate cuts by the Federal Reserve also has been boosting investor confidence, especially this week when the Fed surprised the markets with a cut, its fourth this year.
"The early rate cuts the Fed made in January are starting to work their way through the system," Donald Selkin, chief investment strategist with Joseph Gunnar, told CNNfn's Before Hours. "If you look at a chart of the Nasdaq, it finally broke the severe downtrend it's been in since September, so technically the trend has turned to the upside."
As investor confidence returns, analysts said the elusive bottoming-out process is taking hold and there are better times ahead.
"I think this week's performance has been very indicative of a bottom," said Ehrenkrantz's Hyman. "The market made a lot of sense this week, since the Fed really helped to ensure the positive psychology that is needed to maintain consumer and investor confidence."
As quarterly results continue to be reported, investors will have plenty to pore over. Already 19 out of the 30 Dow components have posted quarterly reports, with all but two beating or matching forecasts.
Results rock and roll
Investors were sifting through a slew of corporate results and guidance to gauge whether or not the worst is truly over, especially for the beleaguered technology sector.
"Some major companies that drive this economy have been talking about a better fourth quarter and better first half of next year," said Art Hogan, chief market strategist with Jefferies & Co. "It's not just predicated on easier interest rates."
According to Alan Kral, portfolio manager at Trevor Stewart Burton, the key for securing a turnaround is to relieve the debt load on consumers, generate jobs and keep income flowing to generate spending.
"The whole story this week has been about boosting and maintaining confidence," Ehrenkrantz's Hyman said.
But with no economic data to pore over, investors turned to quarterly results.
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 EARNINGS ROUNDUP
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Click below for a comprehensive look at the most recent quarterly results
Earnings Roundup
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Microsoft (MSFT: up $0.96 to $69.00, Research, Estimates) surprised Wall Street with earnings that topped forecasts and better-than-expected sales for its fiscal third quarter. But the software maker warned of slightly lower-than-forecast earnings for the fourth quarter and its next fiscal year.
Sun Microsystems (SUNW: down $1.00 to $19.71, Research, Estimates), the workstation developer, reported fiscal second-quarter earnings in line with analysts' estimates, and warned that its current quarter will come up a little short of forecasts.
eBay (EBAY: up $0.66 to $50.65, Research, Estimates), the online auctioneer, greeted its investors with first-quarter earnings that topped estimates, comfort with estimates for the next two quarters, and the view that revenue will exceed forecasts for the second quarter. Three Dow components posted mixed earnings Friday.
Honeywell (HON: down $0.38 to $47.22, Research, Estimates) posted a drop in first-quarter income Friday that was much more severe than expected, and announced it will cut about 5 percent of its staff worldwide.
 Profits soared at Boeing (BA: up $1.07 to $61.70, Research, Estimates), easily topping forecasts on Wall Street, as the world's largest aircraft maker posted a big jump in sales in the first quarter compared with a year earlier, when a strike hurt its results.
Drugmaker Merck (MRK: down $4.66 to $73.61, Research, Estimates) posted an improved first-quarter profit on strong sales Friday, meeting Wall Street expectations. But the downgrade by Merrill Lynch was enough to spark a hefty selloff of the stock.
Mixed signals for telecoms
The fact that most of the news coming from the telecom sector was negative overwhelmed issues in the sector -- even one that had a positive earnings report.
Nortel Networks (NT: down $0.85 to $16.95, Research, Estimates), the telecom equipment maker, reported a first-quarter loss in line with lowered forecasts, but said it will cut 5,000 more jobs than originally planned.
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TELECOM STOCKS
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Click below for a look at how the rest of the telecom sector is faring
Telecom Sector
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AT&T (T: down $0.29 to $22.92, Research, Estimates) will take a charge of up to $780 million due to financial problems at Excite-At-Home Corp., the telecommunications company said Friday. Since AT&T owns about 23 percent of Excite-At-Home, the charge will lead to a loss of $280 million-to-$320 million, the company said in a Securities and Exchange Commission filing.
Nokia (NOK: down $0.15 to $31.45, Research, Estimates), the world's biggest cell phone maker, reported better-than-expected first-quarter pretax profit Friday.
The world's largest mobile phone network maker, Ericsson, said Friday it expects a gloomy second quarter and plans to slash 10,000 jobs. Ericsson (ERICY: down $1.17 to $5.91, Research, Estimates) also posted a first-quarter pretax loss of about $488 million, excluding a gain from the sale of its stake in Juniper Networks. 
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