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A rally on Wall St.
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October 10, 2001: 4:49 p.m. ET
Profits, air strikes serve up no harsh surprises, breaking the market's funk.
By Staff Writer Jake Ulick
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NEW YORK (CNNmoney) - A series of upbeat corporate profit reports sent U.S. stocks surging for the first time this week Wednesday as Wall Street grew more comfortable with the air strikes on Afghanistan targets.
Twenty-eight of the 30 stocks in the Dow Jones industrials rose, a contrast to earlier this week, when investors fretted about a long, difficult war against terrorism. But those worries faded Wednesday as the fourth day of military retaliation against the Taliban network unfolded in an orderly, uneventful fashion.
"The war effort seems to be going extremely well, much better than people thought it would," Barry Hyman, chief market strategist at Ehrenkrantz King Nussbaum, told CNNfn's Street Sweep.
No terrorism resurfaced in the United States, where President Bush released a list of terrorist suspects wanted by the government.
"As we put more time between Sept. 11 and today, the confidence returns to investors and traders," Ted Weisberg, trader at Seaport Securities, told CNNfn's Market Call. "There's a ton of money out there looking for an excuse to buy stocks."
Some of the that money moved into stocks most sensitive to an economic rebound, such as retail, financial, and technology shares. Meanwhile, an economic report showed that companies drew down inventories for a third straight month.
The government has been lowering borrowing costs, cutting taxes and pledging billions of dollars in bailouts and stimulus to buoy an economy that began weakening last year.
The Nasdaq composite index rose 56.06 points, or 3.6 percent, to 1,626.256, its sixth gain in seven sessions. The Dow industrials gained 188.42, or 2 percent, to 9,240.86, breaking a two-day losing streak, while the Standard & Poor's 500 rose 24.24, or 2.3 percent, to 1,080.99.
More stocks rose than fell. On the New York Stock Exchange, advancers beat decliners by a more than 2-to-1 margin as nearly 1.3 billion shares traded. Nasdaq winners also topped losers 2-to-1 as 1.8 billion shares traded.
In other markets, Treasury securities declined for a second session. The dollar rose against the euro and was little changed versus the yen.
A rebound
Among the day's gainers, PepsiCo (PEP: up $0.96 to $49.89, Research, Estimates) topped estimates, earning $866 million, or 48 cents a share, in its fiscal third quarter.
Dial (DL: up $2.28 to $18.23, Research, Estimates) rallied after saying it expects third-quarter earnings, before unusual charges, to top analysts' estimates and said it believes these trends will continue in the fourth quarter.
As the period for positing September quarter results got under way, forest products maker Willamette (WLL: up $0.40 to $45.00, Research, Estimates) and E.W. Scripps (SSP: up $2.39 to $60.99, Research, Estimates), the publisher, both beat forecasts.
One of the Dow's biggest winners, American Express (AXP: up $0.52 to $29.52, Research, Estimates), benefited from a federal judge's ruling that requires rivals Visa and MasterCard to let their member banks issue American Express cards.
Wal-Mart Stores(WMT: up $1.55 to $53.63, Research, Estimates), Citigroup (C: up $1.61 to $44.31, Research, Estimates) and Intel (INTC: up $1.61 to $23.06, Research, Estimates) all rose.
J.M. Smucker (SJM: up $5.26 to $31.15, Research, Estimates) rallied after agreeing to acquire Procter & Gamble's (PG: up $0.80 to $73.34, Research, Estimates) Jif peanut butter and Crisco shortening in a $1 billion stock deal.
Still, all rallies over the last 18 months have proved short-lived. And Arthur Gray, senior managing director of Carret & Co., expects this one will be no different.
"Why are people paying the kind of multiples you only see at the top of a bull market? Gray asked on CNNfn's Street Sweep. "It doesn't make sense."
Investors shrugged off discouraging news from Motorola, which in a conference call Wednesday announced more job cuts and warned that losses will continue in the current quarter.
Earlier, Motorola (MOT: up $0.19 to $16.91, Research, Estimates) said it lost 7 cents per share in the third quarter, matching forecasts. The results marked the third straight quarterly loss for Motorola, whose mobile phone, pager and chip business has been hit hard by a global telecommunications slowdown.
On the Dow, only Boeing (BA: down $0.24 to $35.76, Research, Estimates) and Coca-Cola (KO: down $0.03 to $46.15, Research, Estimates) fell.
But Yahoo! (YHOO: up $0.77 to $10.93, Research, Estimates), the Internet portal operator, rose ahead of its earnings report. After the market close, the company reported it earned 1 cent a share, matching forecasts and well below the 13-cent-a-share profit posted a year earlier.
War worries fade
Stocks fell earlier this week following Sunday's start to the retaliation for the deadly Sept. 11 attacks on New York and Washington. Investors feared that a protracted, difficult war on terrorism would further slow consumer and business spending.
But Mike Murphy, head of equity trading at First Union Securities, said the market has "nervous bullishness" and is slowly recovering from the deadly shocks that crippled America last month.
"It's early, but the further we get from the Sept. 11 attack, the more confidence we have," Murphy said.
Click here for full coverage on the strikes
A report issued Wednesday showed that businesses are shedding unsold goods. The Commerce Department said wholesale inventories declined 0.1 percent, the third straight monthly decline.
Still, Wall Street this month faces the release of hundreds of dismal profit reports expected to show a double-digit percentage drop in earnings.
"I think the earnings disappointments are pretty much factored in," John Forelli, senior vice president and portfolio manager at Independence Investment, told CNNfn.
Still, Forelli sees the market stumbling until the political and economic situation clarifies.
The unemployment rate is expected to rise in the months ahead, a prospect that could further slow consumer spending.
But America's premier motorcycle maker is not slowing down yet. Harley Davidson (HDI: up $5.08 to $47.67, Research, Estimates) reported quarterly earnings that topped forecasts as sales rose 19 percent.
"This is a market that wants to go up, and it's going to take a negative news event to really turn it around," Brett Gallagher, head of U.S. equities with Julius Baer, told CNNfn's Market Call. "Right now it is on autopilot, and it's slowly cruising higher." 
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