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Markets & Stocks
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Stocks ride tech wave
Major indexes bounce after previous session's selling caused by Fed rate cut. Nasdaq leads the way.
June 26, 2003: 5:42 PM EDT
By Alexandra Twin, CNN/Money Staff Writer

NEW YORK (CNN/Money) - Technology shares led a broad stock rally Thursday, with investors returning to buying mode after some spooked selling the day before following the Fed's quarter-point interest rate cut and accompanying statement.

Analysts say that stocks will likely continue to rise through at least early next week, when what has been a mostly positive quarter for stocks comes to an end.

"My sense is that you'll see a few more days of gains as a lot of money managers want to be long the market through the quarter end," said Douglas Altabef, managing director at Matrix Asset Advisors.

While the market is currently in an earnings drought, there are a number of economic reports due over the next few sessions. Friday brings the revised June reading on consumer sentiment from the University of Michigan, forecast to have risen to 87.7 from an initial read of 87.2, according to a consensus of economists surveyed by Briefing.com.

Friday also brings May readings on personal income and personal spending, both of which are forecast to show improvement from the previous month.

On Thursday, the tech-heavy Nasdaq composite (up 31.35 to 1634.01, Charts) rose just under 2 percent, the S&P 500 index (up 10.50 to 985.82, Charts) rose 1.1 percent, and the Dow Jones industrial average (up 67.51 to 9079.04, Charts) gained 0.75 percent.

Late Wednesday, the central bank opted to cut the fed funds rate, which banks use to lend each other overnight funds, by a quarter of a percentage point, to 1.0 percent, a new 45-year low. This was in line with what many Fed watchers had been forecasting, but some had been looking for a half-percentage-point cut. In addition, the Fed indicated concern that the economy still is too weak to fight off deflation in the near term.

In response the Dow and the S&P 500 both fell sharply Wednesday, while the Nasdaq closed just below unchanged.

The Wednesday selling set the market up for a bounce Thursday, which was then built upon by the resilient technology sector, often the leader throughout the three-months-and-counting rally. Intel (INTC: up $0.59 to $20.63, Research, Estimates) stock rose just under 3 percent on no new news, and was just one of many influential big-cap tech stocks bouncing during the session. The No. 1 chipmaker is a member of the Dow industrials and is also one of the most heavily weighted stocks on the Nasdaq.

Investors may have also been in a buying mood after reconsidering their immediate negative reaction to the Fed's statement, analysts speculated.

"We were going to have a knee-jerk negative reaction to the Fed's decision no matter what, with so many different opinions on what should be done, but I think today, it may be that people are looking more closely at the statement and see it as the Fed saying things are slowly going in the right direction," Altabef added.

Techs, airlines, lead advance

On the Dow, IBM (IBM: up $1.86 to $84.35, Research, Estimates), Microsoft (MSFT: up $0.49 to $25.75, Research, Estimates), and Hewlett-Packard (HPQ: up $0.50 to $21.30, Research, Estimates) joined Intel (INTC: up $0.59 to $20.63, Research, Estimates) in the tech advance. Alcoa (AA: up $0.73 to $25.24, Research, Estimates) was another big Dow gainer, up almost 3 percent. In all, 25 of 30 issues closed higher.

Nextel Communications (NXTL: up $1.21 to $18.16, Research, Estimates) added 7.1 percent and was the Nasdaq's sixth-most active stock after the company said it would meet or beat its 2003 earnings forecast.

Shares of American Airlines parent AMR (AMR: up $1.82 to $10.90, Research, Estimates) rallied 20 percent in very active NYSE trade, after the firm reported positive cash flow in May, which led to an upgrade from Credit Suisse First Boston. CSFB raised its rating to "outperform" from "neutral."

Shares of Circuit City Stores (CC: up $0.68 to $8.66, Research, Estimates) rose 8.5 percent and were among the NYSE's most-actives, after it was revealed in an SEC filing that the electronics retailer rejected an $8 per share buyout offer from Mexico's Slim family, which already owns 9.2 percent of the firm's stock. Investors may have been buying on indications that the Slims will now raise their offer.

But on the downside, shares of Irish drugmaker Elan (ELN: down $2.07 to $5.09, Research, Estimates) fell almost 29 percent after it warned that its future was at stake, due to the fact that the delay in the filing of its 2002 U.S. accounts could put it in default with some bondholders. It was the NYSE's second-most actively traded issue.

Market breadth was positive, with gainers topping decliners by nearly two to one on the New York Stock Exchange, where 1.37 billion shares changed hands. On the Nasdaq, winners beat losers five to three as 1.54 million shares traded.

Jobless claims drop

Investors shrugged off a much weaker final reading on the economy's growth in the first quarter, countered by a much stronger than expected weekly jobless claims tally. Both reports were released before the markets opened.

According to the Commerce Department's final calculation, gross domestic product grew at a mere 1.4 percent in the first quarter, down from the previous 1.9 percent reading and economists' forecasts for growth of 1.8 percent.

However, the number of Americans filing for unemployment benefits for the first time fell to a three-month low of 404,000 last week and came very close to the 400,000 benchmark that signifies a shrinking labor market. The previous week's revised reading stood at 426,000.

"The market has now fully reflected its belief in a second-half pick up, but for the kind of rally we've seen to continue, you're going to need to start seeing evidence," said John Davidson, president and CEO at PartnersRe Asset Management. "The weekly jobless claims number this morning is a start, but it's not enough. We could be bouncing around in the next few weeks."

Yields on Treasury bonds continued to rise after the bond market's disappointed reaction Wednesday to the Fed's rate cut. The 10-year note lost 1-2/32 of a point in price, pushing its yield up to 3.53 percent. The dollar continued to climb against the euro, but was weaker versus the yen.

NYMEX light sweet crude futures fell 94 cents to $29.01 a barrel. Gold fell $5.40 to $344.20 an ounce on the Chicago Mercantile Exchange.  Top of page




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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.