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Microsoft moves Wall St.
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November 1, 2001: 5:22 p.m. ET
U.S. indexes like settlement and 30-year bond news, shrug off NAPM data.
By Staff Writer Alexandra Twin
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NEW YORK (CNNmoney) - U.S. equity markets made a breakthrough Thursday as negative economic news in the form of a shrinking manufacturing sector couldn't rain on the parade started by software maker Microsoft.
The Dow Jones industrial average broke a three-day losing streak to rise a triumphant 188.76 points, or more than two percent, to close at 9,263.90. Of the 30 Dow stocks, 28 closed higher on the day and 10 closed more than a dollar higher.
The Nasdaq composite added 56.10, or 3.3 percent, to hit 1,746.30, pushing it back up to pre-Sept. 11 levels. The S&P 500 gained back 24.32, or 2.3 percent, to end the day at 1,084.10.
U.S. stock investors were given a good excuse to rally after Microsoft (MSFT: up $3.69 to $61.84, Research, Estimates) and the U.S. Justice Department reached an agreement settling their long-running antitrust dispute, according to sources.
As per its tentative deal, the largest maker of software for personal computers will be kept under supervision for the next five-to-seven years and face some restrictions on how it conducts business, according to the sources. But it can keep its benchmark Windows software almost unchanged and the blueprints for its operating system will remain protected.
"It was a broad-based rally with good volume," Ted Weisberg, trader, Seaport Securities, told CNNfn's Street Sweep. "All in all a good day."
Weisberg also pointed to the impact of the continuing rally in long-term Treasury bonds following Wednesday's announcement that the 30-year bond, long a benchmark debt issue, is being discontinued. As Treasury securities provide increasingly lower yields, the stock market is becoming relatively more attractive to some investors.
"The Treasury did almost as much in one day as the Federal Reserve has done in a year," Brian Finnerty, co-head of capital markets at C.E. Unterberg Towbin, told CNNfn's Market Call.
The Federal Reserve has cut interest rates nine times this year, twice since the Sept. 11 terrorist attacks against the United States.
Long-term Treasury prices had soared by the close of trade. The 30-year yield slid to 4.72 percent from 4.80 percent late Wednesday, while the 10-year note yield declined to 4.23 percent from 4.26 percent. The dollar was lower against the euro and yen.
As an influential mover, Microsoft's strength helped boost the software and overall technology sector higher on the day, but it also offered some psychological reinforcement within an overall more optimistic mood, analysts suggested.
"Following the stimulus package and the airline bailout, this shows that the government may be willing to work with Corporate America," Arthur Cashin, director of floor trading at UBS PaineWebber, told CNNfn's Halftime Report.
U.S. manufacturing activity fell substantially in October, according to a report issued by the National Association of Purchasing Management, in the first major look at the economy's performance last month. The index showed a fall to 39.8 from 47 in September, missing economists' forecasts of 44, according to Briefing.com. A reading below 50 indicates a contraction.
"There's some nervousness, but the market keeps shrugging off the bad news and looking forward," said Matt Ruane, director of listed trading at Gerard Klauer Mattison & Co. "The story here is really technology. When the techs do well, the Nasdaq is able to rise, and that pushes up other things."
After the close of trade, online discount travel retailer Priceline.com (PCLN: down $0.41 to $4.40, Research, Estimates) reported third-quarter sales and profits that beat expectations.
Market breadth was positive. On the New York Stock Exchange, winners topped losers by a more than 2-to-1 margin as 1.29 billion shares traded. On the Nasdaq, advancers topped losers 4 to 3 as 1.77 billion shares traded.
Tokyo's Nikkei index fell for the fifth straight session Thursday, but the rest of Asia was mixed. Europe's bourses closed modestly higher.
Sun Microsystems, Network Appliance among Thursday's most actives
Microsoft sent an instant message to the tech sector, with computer software makers, networking issues and semiconductors rising. The Philadelphia Semiconductor index, or Soxx, rose 6.7 percent.
Sun Microsystems (SUNW: up $0.69 to $10.84, Research, Estimates), the largest maker of Unix servers, and chipmakers Intel (INTC: up $1.52 to $25.94, Research, Estimates) and Broadcom (BRCM: up $2.92 to $37.33, Research, Estimates) were among the most active companies moving higher.
Network Appliance (NTAP: up $2.42 to $15.72, Research, Estimates) rose on the Microsoft good tide - but also on news that brokerage Wit Soundview had issued positive comments on the storage software maker.
Morgan Stanley initiated coverage of IBM (IBM: up $1.82 to $109.89, Research, Estimates) with a "neutral" rating, saying the stock's valuation suggests limited upside from current levels.
Beleaguered energy trader Enron (ENE: down $1.91 to $11.99, Research, Estimates) said the SEC has turned its inquiry of the company into a full-scale investigation.
United Airlines parent UAL (UAL: up $0.38 to $13.10, Research, Estimates) posted a loss in the third quarter of $10.05 a share, a little narrower than analysts expected but far surpassing the $1.29 a share loss a year earlier. The company also warned about its fourth quarter.
Household products maker Clorox (CLX: up $1.78 to $37.48, Research, Estimates) reported first-quarter earnings per share of 45 cents, beating estimates by 8 cents. The company earned 42 cents a year earlier.
The number-four U.S. cable television operator Charter Communications (CHTR: down $1.64 to $12.50, Research, Estimates) warned that full-year growth will be slower than expected. The company also reported higher third-quarter cash flow and revenue than a year earlier.
Savings and loan Washington Mutual (WM: down $1.63 to $28.56, Research, Estimates) was active and down, as the 30-year bond action may hurt thrifts, analysts at such firms as Goldman Sachs noted.
Lots of economic data
In addition to NAPM, reports before the open of trade showed that weekly jobless claims eased slightly while personal spending slipped in September and personal income was flat.
On Friday, the Labor Department will release October unemployment data. The unemployment rate is expected to rise to 5.2 percent from 4.9 percent in September, according to a consensus of economists surveyed by Briefing.com.
The military retaliation against targets in Afghanistan following the events of Sept. 11 continued. In the latest news, the U.S. government reported that bombers and Navy jets have hit Taliban troops north of Kabul, the capital city. 
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