NEW YORK (CNNfn) - U.S. stocks staged a broad advance Wednesday, led by "old economy" issues, a day after the Federal Reserve cut interest rates for the seventh time but did little to soothe concerns about the economy.
Technology stocks joined in the rally as good news about orders for chip equipment boosted the semiconductor sector.
"Markets tend, short-term, to digest the bad news and focus on the good news but I don't think we're in a sustained rally here," Henry Cavanna, portfolio manager with J.P. Morgan Investment Management, told CNNfn's Street Sweep. "The fundamental underpinning of the market isn't there yet."
Many stocks listed on the Dow are seen as safe havens in times of economic uncertainty. Some also were benefiting from a weaker dollar, which would boost sales for companies with a large overseas presence. Since its low of 83 cents on July 5, the euro has gained 10 percent against the U.S. dollar.
Still, the rally was questionable in terms of its sustainability. During the Fed's easing spree, the markets have risen on the day following interest rate cuts made at regularly scheduled meetings four out of five times.
But the major indexes are still down from the start of the year – the Nasdaq is 25 percent lower, the Dow is 4.7 percent lower, and the S&P 500 is down 11.7 percent.
"I don't think there's any rhyme or reason to it," said Peter Coolidge, senior trader with Brean Murray & Co. "There's some bargain hunting or nibbling going on but there's not much conviction."
On Wednesday, the Dow Jones industrial average rose 102.76 points to 10,276.90, while the Nasdaq composite index advanced 28.71 points to 1,860.01. The Standard & Poor's 500 rose 8.05 points to 1,165.31.
Dow component General Motors (GM: up $1.50 to $57.20, Research, Estimates) led the way higher after it said it expects to make its own third-quarter earnings target, which is a bit better than Wall Street expectations, and that it sees vehicle production reaching previously announced levels for the rest of the year.
The Dow advance was helped by solid gains for diversified manufacturer 3M (MMM: up $2.66 to $109.81, Research, Estimates), aluminum producer Alcoa (AA: up $0.76 to $38.16, Research, Estimates), and Eastman Kodak (EK: up $1.08 to $45.74, Research, Estimates).
Some of the rebound was also attributed to Tuesday's broad selloff, which was spurred on by technical trading (using chart levels to trigger buying or selling opportunities).
"We got stronger on the heels of a feeling that the market got ahead of itself on the downside," said Coolidge. "We're still in the midst of an economic slowdown and we have not turned the corner."
On Tuesday, the bears trounced Wall Street, sending the Dow to a six-week low and the Nasdaq to its lowest level in more than four months.
The main focus Wednesday was still on the economy and while many investors anticipate an economic rebound, the timing keeps getting pushed back, leaving many wondering what to do. And if the recent market action is any indication of sentiment, lack of conviction and indecision reign.
"The market is a discounting mechanism and typically looks six-to-nine months ahead. But now everyone is so shook up they're not willing to look beyond the end of their nose," said Al Goldman, chief market strategist with A.G. Edwards. "What we need is a mood shift, and they (investors) got no supportive therapy from the Fed yesterday (Tuesday)."
Stocks in the broader market churned for most of the trading session a day after the Federal Open Market Committee (FOMC) lowered the key federal funds rate by a quarter of a percentage point to 3.5 percent.
In its accompanying statement, the central bank left the door open for further cuts. The rhetoric disappointed those looking for stabilization rather than more rate cuts
"Basically, people are trying to figure out the comments out of the FOMC meeting yesterday," Goldman said. "They were almost 90 percent cautious – yet Wall Street is ignoring signs of a bottoming economy, so people are concerned."
Market breadth was positive. On the Nasdaq, advancers topped decliners 2,047 to 1,585 on volume of 1.53 billion shares. On the New York Stock Exchange, advancers beat decliners 1,840 to 1,267 as 1.09 billion shares changed hands.
In overseas stock markets, Asia's were mixed and Europe's rallied. Treasury securities fell. The dollar rose against the euro and the yen.
Crisp chips
While the jury may be out on the timing of an economic recovery, investors had some news on the technology front to chew on, which injected a modicum of optimism.
"The door being open for further rate cuts is bad news. We don't need further rate cuts, we need stability in the economy," said Art Hogan, chief market analyst with Jefferies & Co. "We do care that we oversold yesterday and there's relatively positive news on the semiconductor front."
Late Tuesday, the Semiconductor Equipment and Materials International, a trade group, said chipmakers saw $764 million in orders in July, up from $727.5 million in June. Companies received $67 worth of new orders for every $100 of product shipped for the month, also an improvement.
Intel (INTC: up $0.89 to $27.96, Research, Estimates), feeling the heat from rival Advanced Micro Devices (AMD: down $0.24 to $14.51, Research, Estimates) in the high stakes chips race, is getting ready to sharply reduce prices and develop even faster chips, according to a published report Wednesday. Communications chipmaker Triquint Semiconductor (TQNT: up $2.92 to $22.32, Research, Estimates) said it was comfortable with its earnings estimates for the remainder of the year and expects demand for cellular phones to pick up by the end of 2001.
And Intuit (INTU: up $6.59 to $36.04, Research, Estimates), a maker of personal finance software, also lifted sentiment. Prudential Securities raised its rating to "buy" from "hold" after Intuit reported a fourth-quarter loss of 8 cents a share, 2 cents better than expectations.
Still, it wasn't all rosy in technology.
Fiber-optic networking equipment supplier Sycamore Networks (SCMR: up $0.08 to $5.08, Research, Estimates) reported a loss for its fiscal fourth quarter on sales that fell 40 percent from a year earlier. And executives of Sycamore said revenue in the current quarter could fall as much as 75 percent from a year earlier as the slowdown in spending among its key customers continues to weigh on results.
Drug issues down
Aside from technology, drug stocks attracted some attention, albeit less than positive.
A study in the Journal of the American Medical Association said there are increased risks of heart attack associated with two arthritis drugs – Merck's (MRK: up $0.47 to $71.22, Research, Estimates) Vioxx and Pharmacia's (PHA: down $0.96 to $43.20, Research, Estimates) Celebrex, which is co-marketed by Pfizer (PFE: up $0.04 to $40.68, Research, Estimates). Besides the arthritis study, Merck also suffered from a Wall Street Journal article saying cholesterol-lowering drugs like the company's version of statin could suffer in response to fellow drug Baycol's recent recall.
J.C. Penney (JCP: down $1.33 to $25.05, Research, Estimates) affirmed its fiscal third-quarter and full-year guidance Wednesday, projecting earnings in a range slightly below the consensus of Wall Street analysts.
Media conglomerate AOL Time Warner (AOL: down $0.40 to $39.50, Research, Estimates) is cutting 1,700 more jobs – 1,200 at its flagship Internet service and 500 at iPlanet, an e-commerce solutions company formed by an alliance between Netscape and Sun Microsystems (SUNW: down $0.22 to $13.68, Research, Estimates). The cuts will result in a charge of $100 million-to-$125 million in the third quarter. AOL is the parent of CNNfn. 
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