Markets & Stocks
Stocks stage a turnaround
Major indexes erase early losses; slowly improving tech stocks among positive factors in play.
August 26, 2002: 5:08 PM EDT
By Alexandra Twin, CNN/Money Staff Writer

NEW YORK (CNN/Money) - U.S. stocks managed a substantial turnaround Monday, with increasing gains in select techs and a recovery in blue chips helping the Dow Jones industrial average reclaim more than 160 points by the close.

The Dow Jones industrial average gained 46.05, or 0.52 percent, to close at 8,919.01, recovering more than 160 points from its lows of the session. The Nasdaq composite added 11.12, or 0.81 percent, to 1,391.74. The Standard & Poor's 500 index rose 7.09, or 0.75 percent, to 947.95.

"I think it's very positive that the market was down more than 100 points and has come back, but this is essentially a vacation week," said Jack Baker, head of equities at Putnam Lovell Securities. "There's hardly anyone here and the market is highly susceptible to rumors and any other kind of news. At any given time, you could see a move in either direction of 100 points or more and it doesn't signal a change in direction."

"There's going to be nervousness for the next few weeks," Baker added. "From an historical perspective, September tends to be one of the worst months. In addition, you have a lot of people moving off to the sidelines ahead of September 11."

On Tuesday, economic reports on durable goods orders in July and consumer confidence in August are expected.

Late Tuesday, computer hardware maker Hewlett-Packard (HPQ: up $0.15 to $14.85, Research, Estimates), the last Dow component to report results, is expected to report earnings of 14 cents a share in its most recent quarter, compared with 11 cents in the year-earlier period.

On Monday, tech stocks spearheaded a slow recovery throughout the session.

Sun Microsystems (SUNW: up $0.22 to $4.40, Research, Estimates), the No. 1 Unix server maker, advanced, as did Intel (INTC: up $0.17 to $18.13, Research, Estimates) and a number of other chip stocks, while telecoms built on their earlier strength.

Telecommunications gear maker Ciena (CIEN: up $0.23 to $4.39, Research, Estimates) rose after SoundView Technologies upgraded shares of the stock to "outperform" from "neutral," saying that the July quarter probably will be the bottom in terms of analysts' expectations and the beginning of the move back to profitability. Lucent Technologies (LU: up $0.37 to $1.87, Research, Estimates) rose on a positive note out of Deutsche Securities, while sector mate JDS Uniphase (JDSU: up $0.26 to $3.30, Research, Estimates) rallied in tandem.

Among Dow components, the broader telecom push gave a lift to AT&T (T: up $0.37 to $12.59, Research, Estimates), with JP Morgan Chase (JPM: up $0.78 to $26.49, Research, Estimates) and General Motors (GM: up $1.48 to $49.40, Research, Estimates) the other big gainers.

Dow conglomerate Walt Disney (DIS: down $0.16 to $16.67, Research, Estimates) declined after Fitch downgraded the media conglomerate's credit rating, saying the rating outlook is negative. The move reflects continued weakness in key measures of cash-flow leverage as a result of higher debt from the Oct. 2001 purchase of Fox Family, the firm added, as well as weakness at the ABC network and the company's parks and resorts.

In other corporate news, according to published reports, Swiss foodmaker Nestle has offered $11.5 billion to buy U.S. rival Hershey Foods (HSY: up $1.77 to $76.80, Research, Estimates). However, the companies refused to comment on the reports.

Housing sector holds up

Market participants seemed to shrug off mostly positive reports on the health of home sales in July. Sales of new homes rose 6.7 percent to an annual unit rate of 1.017 million from 1.0 million in June, when economists surveyed by were expecting a decline to a 975,000 million unit rate. Existing home sales rose 4.5 percent to a 5.33 million unit annual rate versus an annual rate of 5.07 million in June. Economists were expecting a 5.3 million unit rate.

The positive report seemed to reassure market watchers that consumer spending is holding up. But it is also only the first of many in a week heavy on economic indicators.

"I think that the averages are holding their own," said Bryan Piskorowski, market analyst at Prudential Financial. "You've got to keep in mind that we're coming off five weeks of gains on the Dow and the S&P. The housing numbers were strong, so we're starting off the week on the right foot, but we've got a lot of economic data to get through this week and we're going to be looking for signs that the economy is holding up."

Treasury prices were a little higher, pushing the yield on the 10-year bond down to 4.22 percent.

Stocks also lost value after the dollar, which had rallied earlier, turned flat versus the euro and the yen. Light crude oil prices rose 70 cents to $29.33.

Market breadth was positive on light volume. On the New York Stock Exchange, winners beat losers by more than 11-to-5 as 993 million shares changed hands; it was the third lightest volume day of the year. On the Nasdaq, advancers beat decliners by almost 5-to-3 as 1.41 billion shares traded.  Top of page

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