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Wall St. heals some wounds
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January 17, 2002: 4:45 p.m. ET
Positive guidance, from GE, Yahoo!, Compaq halts market's slide.
By Staff Writer Jake Ulick
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NEW YORK (CNN/Money) - Upbeat forecasts from nearly two dozen companies lured investors back to the U.S. stock market Thursday, a day after the major indexes tumbled to their lowest levels of the year.
The Dow Jones industrial average recouped more than half of Wednesday's loss while the Nasdaq composite index returned to positive territory for the year.
Three Dow components -- United Technologies, General Electric and Citigroup -- either met or beat forecasts while offering reassurance going forward. And Yahoo! and Compaq Computer rallied after raising financial guidance.
"What a difference a day makes," Bryan Piskorowski, market commentator at Prudential Financial, told CNNfn's Halftime Report.
IBM (IBM: up $2.65 to $119.90, Research, Estimates) and Microsoft (MSFT: up $1.99 to $69.86, Research, Estimates) may help stocks Friday. Both technology companies posted quarterly profits that topped forecasts.
But Thursday's gains did nothing to break a stubborn trading range. After falling to three-year lows in September, stocks rebounded late last year only to make no real progress in 2002. One of the broadest market indexes, the Standard & Poor's 500, stands 15.5 percent above last year's low but 25.4 percent beneath its all-time high.
The first busy week for December-quarter results was just as volatile. Companies, on average, are topping Wall Street forecasts during a period when overall profits are expected to fall more than 20 percent.
"We are jumping over lower hurdles," Piskorowski said. "But there are more constructive comments going forward."
Those comments helped Thursday, with the Dow industrials adding 137.77 points, or 1.5 percent, to 9,850.04, narrowing its 2002 loss to 1.7 percent. The Nasdaq rose 41.38, or 2.1 percent, to 1,985.82 and is up 1.8 percent on the year. The S&P 500 tacked on 11.31, or 1 percent, to 1,138.88.
More stocks rose than fell. On the New York Stock Exchange, advancing stocks topped declining ones 5-to-3 as 1.3 billion shares traded. Nasdaq winners edged losers 10-to-7 as 1.8 billion shares changed hands.
In other markets, Treasury securities fell. The dollar rose against the yen and euro.
Pleasant surprises
Signs that the business outlook is not as dire as investors had thought lifted stocks.
The Dow's best gainer, United Technologies (UTX: up $4.30 to $63.35, Research, Estimates), topped forecasts and reiterated its profit target for the current quarter.
Fourth-quarter earnings at General Electric (GE: up $1.08 to $38.75, Research, Estimates), the biggest company in terms of market value, matched forecasts. Looking forward, the conglomerate said it will meet profit expectations for the current year.
Fellow Dow component Citigroup (C: up $1.04 to $49.90, Research, Estimates) topped estimates with a fourth-quarter profit of 74 cents per share.
"I think the economy will surprise us on the upside because of what the Fed has done," David Sowerby, vice president of Loomis Sales, told CNNfn's Market Call. Last year's 11 interest rate cuts by the Federal Reserve took short-term borrowing costs to 40-year lows.
Compaq Computer (CPQ: up $0.70 to $11.80, Research, Estimates) earned 5 cents a share in the latest quarter on an operating basis, much better than expected. The company also raised forecasts -- as did rival Apple Computer (AAPL: up $1.70 to $22.48, Research, Estimates), whose results were in line.
Operating profit at Yahoo! (YHOO: up $2.25 to $20.12, Research, Estimates) also topped forecasts. The Internet portal upped its sales forecast for the current year.
For stock market bulls, the upbeat results lifted hopes that 2001's year-end rally accurately anticipated an improving business outlook. Coming off two negative years, the Dow industrials are lower in 2002, while the Nasdaq clings to slight gains.
Plenty of cautiousness remained. Chip equipment maker Applied Materials (AMAT: up $0.05 to $41.60, Research, Estimates) continued to fall two days after one of its biggest customers, Intel (INTC: up $0.82 to $34.53, Research, Estimates), said it would cut capital spending.
Network equipment maker Sonus Networks (SONS: down $0.51 to $4.41, Research, Estimates) said sales in the current quarter may fall short. Morgan Stanley and W.R. Hambrecht downgraded Redback Networks (RBAK: down $1.14 to $4.72, Research, Estimates) after the communications equipment maker posted widening losses.
"We do seem to have stabilized here but this is a real nervous market," Linda Jay, trader at LaBranche & Co., told CNNfn's Market Call.
Troubled retailer Kmart (KM: down $0.04 to $1.56, Research, Estimates) outlined a management shakeup Thursday; the company's shares were down 86 percent year-to-date when trading began.
Indexes seek their level
As for stocks, few analysts expect a return to the Sept. 21 lows. But even Wall Street's most bullish strategists don't see a quick return to the record highs of 2000, when the Dow rose above 11,722 and the Nasdaq exceeded 5,000.
Ninety-five S&P 500 companies have posted results. Of them, 57 beat forecasts, 28 met, and 19 fell short.
Click here for a full look at the day's earnings
In the latest sign that the worst layoffs that followed Sept. 11 have passed, the Labor Department said new unemployment claims fell by 14,000 to 384,000 last week, the lowest levels since July.
Separately, builders broke ground on new homes and apartments at a rate of 1.57 million annual units in December, down 3.4 percent from November's revised 1.62 million rate, the Commerce Department said.
The Philadelphia Federal Reserve said its January index of business conditions in the Mid-Atlantic region showed surprising strength. For Ian Shepherdson, chief U.S. economist at High Frequency Economics, the Philly index, along with the falling jobless claims, reaffirmed his views that the Fed need not cut interest rates later this month.
"This is an extremely strong report," Shepherdson wrote in a note to clients. 
Click here to send mail to Jake Ulick
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