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U.S. techs cling to gains
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October 4, 2001: 5:14 p.m. ET
Dell Computer, Cisco news keep tech shares strong; the Dow struggles
By Staff Writer Alexandra Twin
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NEW YORK (CNNfn) - U.S. equity markets closed with mixed feelings Thursday, with tech investors crying "rally" on the positive Dell Computer quarterly reiteration, while blue chip diehards took negative economic data to heart.
Blue chip stocks, symbolized by the Dow Jones industrial average, were shaky amid renewed economic concerns in the wake of a surge in unemployment claims.
"The profit recession is here and people are still uncertain as to when things are going to come back," Francis Gannon, portfolio manager, SunAmerica Asset Management, told CNNfn's Street Sweep. "There's still a lot of nervousness."
The Nasdaq composite index closed up 16.50 to 1,597.31. The Dow Jones industrial average fell 62.90 to 9,060.88. The Standard & Poor's 500 was down 2.66 to 1,069.62.
No. 1 personal computer maker Dell (DELL: up $1.68 to $22.32, Research, Estimates) gave skeptical analysts a nice surprise when it reaffirmed its guidance for third-quarter profit before the open, saying its business model has put it in a position that's "better than it's ever been."
The broader rally lost steam in late afternoon, coinciding with negative comments from influential multibillionaire investor Warren Buffett, Gannon said. Buffett, who heads Berkshire Hathaway (BRK.A: down $850.00 to $71850.00, Research, Estimates), said the United States is in a recession that probably is "relatively deep and extended," echoing the sentiment of a number of economists.
Other analysts pinned the turnaround on a mid-afternoon report of a Florida man hospitalized for anthrax, initially exacerbating rampant fears of bio-terrorism attacks. However, U.S. Health Secretary Tommy Thompson disputed the theories, saying that anthrax is contracted naturally from time to time and that this particular case was an isolated incident.
The impact of two of the more influential names on Wall Street – Dell, as well as Cisco reiterating guidance on Wednesday – initially seemed to repair more than just ailing tech stocks, giving a lift to bruised tech investor confidence as well.
"People are feeling better," said Jack Baker, head of equities at Putnam Lovell Securities. "The perception of investors is that, if Dell and Cisco are correct, even though everybody knows that the fourth quarter is going to be terrible, the thought is this could be the tone of other corporations looking forward to 2002."
However, some market watchers poked at the Dell bubble after the company concluded a conference call with analysts, saying good news for Dell does not necessarily mean good news for everyone.
"Dell reaffirmed their guidance for the third quarter, but gave no guidance going forward. They also said that industry growth for the third quarter was going to be worse than expected," influential Lehman Bros. senior analyst Dan Niles told CNNfn.
Defensive stocks, often seen as a safe haven during times of uncertainty, dragged down the Dow.
"Like water rising, the market is trying to find its own level," Bryan Piskarowski, market commentator, Prudential Financial, told CNNfn's The Money Gang. "The rally is not sustainable in the long term. There's still a lot of uncertainty."
Aluminum maker and Dow component Alcoa (AA: down $1.27 to $30.82, Research, Estimates) closed the day lower after reporting modestly lower third-quarter profit before the bell that was in line with analysts' estimates.
"While the Dow has been fluctuating, it's positive that the Nasdaq has been able to hold on," Baker said.
Stocks rose dramatically Wednesday after President Bush proposed adding $75 billion to stimulate the economy and Cisco Systems reaffirmed its financial targets. On Tuesday, the Federal Reserve cut interest rates to the lowest level in nearly 40 years.
But the developments in economic data were mixed. A report showing that jobless claims soared last week in the wake of the Sept. 11 terrorist attack that killed thousands. The number of unemployment filings rose to 528,000 from 457,000 a year earlier.
In addition, a report from the employment consultant Challenger Gray and Christmas showed 248,332 job cuts in September, with 200,807 announced since the Sept. 11 attacks.
On the positive side, factory orders were unchanged in August, topping expectations of a fall of 0.4 percent by economists.
After the close of trade, personal computer maker Gateway (GTW: up $0.15 to $4.85, Research, Estimates) warned that its third-quarter loss will be much wider than previously expected, while specialty coffee retailer Starbucks said it is comfortable with its previous fiscal 2001 earnings per share estimates.
Market breadth was positive. On the New York Stock Exchange, advancers topped decliners by more than 4 to 3 as 1.55 billion shares traded. On the Nasdaq, winners beat losers by a more than 3-to-2 margin as 2.52 billion shares traded.
Asian and European stocks closed higher. Treasury prices closed higher. The dollar was higher against both the euro and the yen.
Dow struggles to join the rally
The Dow has been stuck in a narrow trading range for several days. Negative market breadth, more than any specific company news, pulled the average down by the close.
Among Dow issues, United Technologies (UTX: up $1.23 to $52.30, Research, Estimates) and Microsoft (MSFT: up $0.21 to $56.44, Research, Estimates) moved up, while Procter & Gamble (PG: down $2.05 to $71.20, Research, Estimates) and General Motors (GM: down $1.51 to $41.21, Research, Estimates) were some of the Dow's biggest losers.
Retailers also weighed on the average, with Home Depot (HD: down $1.64 to $39.19, Research, Estimates) and Wal-Mart Stores (WMT: down $1.23 to $51.50, Research, Estimates) falling.
Dell boosts the techs
The Dell news boosted the computer hardware sector throughout most of the day and kept certain select tech names up, while chips and networking stocks liked the Cisco news. But telecommunication, fiber-optic, and retail names kept the indexes from sustaining the day's highs.
Cisco boosted networking issues such as Brocade Communications (BRCD: up $3.03 to $20.14, Research, Estimates) and Juniper Networks (JNPR: up $1.27 to $13.27, Research, Estimates), which got an extra lift from a Morgan Stanley upgrade.
Dell boosted other "box" makers, IBM (IBM: up $0.36 to $97.31, Research, Estimates) and Apple Computer (AAPL: up $0.90 to $15.88, Research, Estimates). The Goldman Sachs Hardware index closed up four percent.
Dell also gave a lift to semiconductors, with such names as Intel (INTC: up $0.32 to $21.55, Research, Estimates), Applied Micro Circuits (AMCC: up $0.29 to $7.98, Research, Estimates) and PMC-Sierra (PMCS: up $0.64 to $12.72, Research, Estimates) showing dramatic strength. The Philadelphia Semiconductor Index, or the Soxx, closed up more than 4 percent.
The good sentiment seemed to distract investors from continued warnings, particularly in the software sector.
Internet security company Check Point Software Technologies (CHKP: up $1.11 to $27.10, Research, Estimates) said late Wednesday that it will meet current Wall Street estimates for the quarter, despite a September revenue drop. Netegrity (NETE: up $1.76 to $12.31, Research, Estimates), another in the Internet security sector, issued a third-quarter warning and rose nonetheless.
Peregrine Systems (PRGN: down $1.91 to $13.97, Research, Estimates) was an exception on the day, in that it fell on bad news. Analysts issued negative commentary on the business software maker after it warned late Wednesday that its fiscal second-quarter results would miss current expectations.
The Goldman Sachs Software index rose three percent.
Biotechnology stocks, which have been consistently higher even when other techs have sold off, were mixed on company-specific news.
Barr Laboratories (BRL: down $0.28 to $83.12, Research, Estimates) said it expects its first-quarter earnings per share will top current estimates due to strong sales for its generic Prozac anti-depressant drug.
Drugmaker Andrx (ADRX: down $7.79 to $67.28, Research, Estimates) said it expects a delay in approval of its generic heartburn and ulcer drug Prilosec due to issues raised by the medicine's original maker AstraZeneca.
Telecommunication and fiber-optic stocks bucked the otherwise positive tech trend.
Fiber-optic cable maker Corning (GLW: down $1.30 to $7.70, Research, Estimates) lost more than 14 percent after it said that it expects to post a weaker-than-expected profit for the third quarter, a fourth-quarter loss and 4,000 more job cuts.
Wireless e-mail device maker Research in Motion (RIMM: down $0.29 to $15.46, Research, Estimates) lowered its third-quarter guidance.
High-speed communications company Global Crossing (GX: down $1.02 to $1.07, Research, Estimates) warned late Wednesday that third-quarter results will miss estimates and that it is in talks to merge with its Asian affiliate, Asia Global Crossing (AX: down $1.04 to $1.15, Research, Estimates).
But Motorola (MOT: up $0.54 to $15.89, Research, Estimates) was awarded a 10-year contract with the federal government, for an unspecified sum. The news lifted Nextel Communications (NXTL: up $1.80 to $9.16, Research, Estimates) as well. The two companies also announced that they would team up to update their technology. 
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