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Anticipation on the Street
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October 22, 2001: 7:23 p.m. ET
Stocks are rallying on hopes for 2002, despite mixed third-quarter results.
By Michael Sivy
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NEW YORK (CNNmoney) - Stocks advanced strongly on Monday, despite mixed news on the earnings front. At the close, the Dow was up 172 points, or nearly 1.9 percent, while the Nasdaq composite climbed 2.2 percent. The market seems to be adjusting to the risk of further terrorist incidents and has taken the latest anthrax scares in stride -- a marked change from last week. Investors are also anticipating strong earnings gains next year and appear unfazed by mixed third-quarter results.
Several leading companies announced third-quarter results or provided earnings guidance on Monday. The most upbeat news came from tech, where Applied Materials (AMAT: up $0.45 to $35.22, Research, Estimates), the leading maker of semiconductor-manufacturing equipment, outlined impressive growth opportunities at a technology conference. CEO Dan Maydan said the company's total revenues could double by 2005. Applied Materials stock jumped nearly 7 percent on the news, and other tech giants posted strong gains. Intel was up nearly 5 percent on the day, while Microsoft rose nearly 4 percent.
Financial services also gained despite a pretty dismal report from American Express (AXP: down $0.12 to $30.20, Research, Estimates). The company said that cardholders had cut back substantially on dining and shopping following Sept. 11. As a result, third-quarter results were down 60 percent from a year ago and were also substantially below what analysts expected. Nonetheless, the share price rose $1, or 3.4 percent. Other leading financial stocks also gained: J.P. Morgan (JPM: up $0.84 to $36.15, Research, Estimates) advanced 4.2 percent, while Citigroup (C: up $1.09 to $48.10, Research, Estimates) moved up 2.5 percent.
The Dow's biggest gainer on Monday was Minnesota Mining & Manufacturing, up more than 5 percent despite a down earnings report. The manufacturer of Scotch Tape and Post-it Notes reported a 21 percent decline in third-quarter earnings. Results were in line with expectations, however, and analysts gave 3M (MMM: down $0.56 to $106.83, Research, Estimates) good marks for reducing costs.
Among only a handful of losers in the Dow, SBC Communications' (SBC: down $2.50 to $38.90, Research, Estimates) share price sank more than 5 percent after the company reported an earnings decline that was slightly worse than consensus estimates. For the quarter, profits were down 31 percent because of weakness across the board -- in business, consumer and wireless services. The company is planning more layoffs and cost reductions and said that earnings weakness will likely continue well into next year.
Analysts will watch fourth-quarter trends closely because of the importance of sales during the holiday season. But investors already know business will be lousy through the end of the year. The key question is the outlook for 2002 profits. So don't spend too much time puzzling over third-quarter reports. What determines where stock prices go from here will be evidence that supports or undercuts expectations of a strong first quarter. In the stock market, as in fine dining, anticipation counts for a lot.
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