NEW YORK (CNNfn) - A brutal start on Wall Street gave way to gains by Thursday's close, as investors decided against punishing the entire market for a fresh batch of individual corporate bad news.
Ciena and Brocade Communications, two makers of communications equipment, served up dour business outlooks, sending their shares tumbling. Dell and Hewlett-Packard fell ahead of their quarterly profit reports, which showed big declines.
But Cisco Systems and Microsoft drew buyers late in the session, saving the Nasdaq composite index from a 2 percent decline. Gains in Procter & Gamble and United Technologies lifted the Dow Jones industrial average, where 19 of 30 stocks rose.
"Maybe investors are realizing there's more to the economy than technology," Alan Skrainka, chief market strategist at Edward Jones, told CNNfn's Street Sweep.
Patrick Boyle, head financial trader at Credit Suisse First Boston, linked some of the rebound to short-covering, where investors who bet that stocks would fall buy back those stocks as they rise.
Boyle also cited the buying that often comes ahead of Federal Reserve meetings. Buying has not come often these days. The Nasdaq's gain was only its second in 10 sessions.
Promising economic news may have helped. Government figures signaled a stabilizing job market and buoyancy in the home building sector. Other numbers showed falling consumer prices, giving Federal Reserve policy makers more room to cut interest rates again next week.
Another factor could be Friday's expiration of options on stocks and stock indexes. The prelude to that session often comes with surprising moves.
Whatever the reason, the Nasdaq rose 11.43 points, or 0.6 percent, to 1,930.32, while the Dow Jones industrial average gained 46.57 points to 10,392.52. The Standard & Poor's 500 rose 3.63 to 1,181.65.
But Jim Waggoner, chief market strategist at Sands Brothers, is not convinced that the gains are sustainable until the economy shows real signs of turning.
"We can't make very much of it," Waggoner told CNNfn's Street Sweep.
Market breadth was mixed. Nasdaq decliners topped advancers 1,859 to 1,785 on volume of 1.6 billion shares. But New York Stock Exchange winners beat losers 1,679 to 1,397 as 1 billion shares changed hands.
In other markets, the dollar, which has fallen in recent days, edged higher against the euro and yen. Treasury securities rose.
Burnt Ciena
Ciena (CIEN: down $8.50 to $19.62, Research, Estimates), which makes fiber-optic equipment, joined Brocade, a provider of switches for storage networks, in cutting profit forecasts.
Investors paid less attention to Ciena's most recent quarter, when fiscal third-quarter profit and revenue edged Wall Street expectations.
Rivals ONI Systems (ONIS: down $1.56 to $17.02, Research, Estimates), JDS Uniphase (JDSU: down $0.14 to $8.18, Research, Estimates) and Sycamore Systems (SCMR: down $0.41 to $5.65, Research, Estimates) also sank.
Brocade Communications Systems (BRCD: down $2.38 to $27.96, Research, Estimates) added to the pessimism after the maker of switches for data storage networks said fiscal fourth-quarter results should fall just below targets.
In the latest profit reports, Dow component Hewlett-Packard's (HWP: up $0.03 to $24.13, Research, Estimates) profit fell to 5 cents per share, during the quarter ended July 31. That's down 90 percent from the 49 cents per share it reported during the same quarter last year.
Fiscal second-quarter profit at Dell Computer (DELL: down $0.12 to $25.38, Research, Estimates) fell to 16 cents per share, from 22 cents in the prior-year period.
Earnings are a problem. First Call expects corporate profits in the current quarter will fall 13.1 percent during a year that is forecast to see the first decline in earnings since 1991. S&P 500 companies are not expected to post rising profits until the first three months of 2002.
Encouraging numbers
A trio of economic data hit the wires before the market opened. The Consumer Price Index, the government's main inflation gauge, fell 0.3 percent in July. The biggest drop in more than 15 years came on a plunge in energy prices.
Separately, housing starts rose to a seasonally adjusted annual rate of 1.67 million units last month, a 2.8 percent increase from the June rate of 1.63 million.
The number of Americans filling for jobless benefits fell to 380,000 last week from an upwardly revised 388,000 the prior week, suggesting job losses may be slowing.
To keep the economy from recession, the Federal Reserve next Tuesday is expected to cut interest rates for the seventh time this year.
"The (Fed) will continue to focus policy on reviving economic growth," said Steven Wood, economist at FinancialOxygen.com.
Most economists expect a quarter-percentage-point reduction, taking the federal funds rate for overnight lending between banks to 3.50 percent from 3.75 percent.
A survey on manufacturing by the Fed's regional bank in Philadelphia fell well below expectations in August, another sign of weakness in the factory sector.
The session held several gainers. Procter & Gamble (PG: up $2.01 to $74.19, Research, Estimates) was the biggest winner on the Dow, followed by United Technologies (UTX: up $2.76 to $73.60, Research, Estimates) and General Motors (GM: up $0.58 to $62.57, Research, Estimates).
And some of Nasdaq's biggest names also rose. They include Microsoft (MSFT: up $1.42 to $64.62, Research, Estimates) and Cisco Systems (CSCO: up $0.48 to $17.48, Research, Estimates).
Seventeen months ago, the Nasdaq was trading near its record high of 5,048. It now stands more than 60 percent below that, prompting one market watcher to recall the Dutch tulip mania of the 1600s.
"A lot of people think these tulips are coming back," Art Cashin, head of NYSE floor operations for UBS PaineWebber, told CNNfn's The Money Gang. "Many are not." 
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