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Wall St. snaps back
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January 30, 2002: 4:55 p.m. ET
A Tyco turnaround, a Fed-induced rally -- either way, stocks rebound.
By Staff Writer Jake Ulick
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NEW YORK (CNN/Money) - U.S. stocks rallied Wednesday as investors poured into retail, financial and technology shares after the Federal Reserve signaled its year-long effort to revive the economy shows signs of success.
Dennis Kozlowski also helped. The CEO of Tyco International said he will buy 500,000 company shares, which are down 40 percent this year amid questions about dubious accounting.
Down for much of the session, stocks began rising by early afternoon and recouped about half the losses from Tuesday when corporations restating profits sparked a major selloff
The Dow Jones industrial average jumped 144.62 points, or 1.5 percent, to 9,762.86, narrowing its 2002 losses to 2.5 percent. The Nasdaq composite index rose 20.45, or 1.1 percent, to 1,913.44 and is down 1.9 percent on the year. The Standard & Poor's 500 advanced 12.93, or 1.2 percent, to 1,113.57.
Confidence that 11 previous rate cuts are starting to work, Fed policy makers wrapping up their first meeting of 2002 left interest rates unchanged for the first time in more than a year.
"We are starting to see (economic) stabilization and, I think the fact that the Fed didn't make a move speaks to that," Art Hogan, market analyst at Jefferies & Co., told CNNfn's The Money Gang.
Hours earlier, the government said the nation's economy saw a surprise expansion in the fourth quarter a day after reports showed surprisingly strong consumer confidence and durable goods orders.
More stocks rose than fell Wednesday. On the New York Stock Exchange, advancing stocks topped declining ones 9-to-6 as 1.9 billion shares traded. Nasdaq winners beat losers 5-to-4 as 2 billion shares changed hands.
In other markets, Treasury securities fell. The dollar slipped against the yen and rose versus the euro.
Tyco buyback
Saying "economic activity is beginning to firm," the Fed may have pushed back some of the market's worst worries about faulty bookkeeping.
The Fed's statement left open the door for lower rates ahead. But their cautious optimism also raised questions about when central bankers will raise borrowing costs, something they haven't done since May, 2000.
Either way, economically sensitive retailers gained, including Home Depot (HD: up $2.07 to $49.07, Research, Estimates). Financial shares such as J.P. Morgan also rallied along with IBM (IBM: up $2.55 to $105.55, Research, Estimates), the No. 1 technology company in terms of sales.
But no stock saw more action than Tyco (TYC: up $1.10 to $34.75, Research, Estimates) , which set a one-day NYSE volume record with more than 186 million shares traded. In addition to Kozlowski, Tyco CFO Mark Swartz also said he would buy 500,000 shares.
Tyco, like the stock market, started the day lower after Anadarko Petroleum became the latest company to restate profits, and CompuCredit Corp (CCRT: down $3.63 to $5.22, Research, Estimates) said it may have to downwardly restate its fourth-quarter profit by $5.8 million.
After the markets closed Tuesday, Anadarko Petroleum (APC: down $0.51 to $46.89, Research, Estimates) restated its third-quarter 2001 results, saying it lost $1.35 billion, not the $270 million originally reported.
Shares of Elan (ELN: down $5.95 to $29.25, Research, Estimates), an Irish drug company, tumbled after a Wall Street Journal article raised questions about how the company books earnings.
"We continue to suffer from what I call Enron-itis," Ted Weisberg, trader at Seaport Securities, told CNNfn's Market Call.
Investors wary after the Enron implosion have punished shares on any hint of accounting problems. Tyco has never restated profits, but its many acquisitions and its former status as a Wall Street darling have made it vulnerable.
Losses continued, meanwhile, for Williams Cos. (WMB: down $0.78 to $18.00, Research, Estimates) and PNC Financial (PNC: down $0.37 to $55.71, Research, Estimates). Both companies said they had misstated previously reported results.
In a statement Thursday, Williams called the recent selloff "an overreaction not supported by facts" and said no new issues have surfaced since credit agencies gave the company a clean bill of health last month.
Signs of stability
Recent data support the Fed's cautious confidence. The rise in fourth-quarter GDP came as consumers spent money even as companies slashed hundreds of thousands of jobs following the Sept. 11 terrorist attack.
But corporations are struggling with plenty of weakness. Fourth-quarter profit at AT&T (T: down $0.36 to $17.45, Research, Estimates) fell to 5 cents a share from 24 cents a share a year earlier, topping forecasts.
Profit at Foundry Networks (FDRY: up $0.55 to $8.04, Research, Estimates) fell short of forecasts as telecom services providers cut back on spending on Internet gear.
Cash earnings at AOL-Time Warner (AOL: down $0.30 to $26.40, Research, Estimates), which owns CNN/Money, matched forecasts, while the net losses widened.
Bucking the trend, Philip Morris (MO: down $0.22 to $49.57, Research, Estimates) reported that fourth-quarter profit rose to 99 cents a share from 90 cents a year earlier, matching Wall Street forecasts. The maker of Marlboro cigarettes, Miller beer and Kraft cheese named CFO Louis Camilleri as its new chief executive.
A rally questioned
With worries that another Enron-like bookkeeping scandal is lurking somewhere, some analysts questioned the sustainability of Wednesday's rally.
"It's impressive, but it's probably technical," William Sullivan, economist at Morgan Stanley, told CNNfn's Street Sweep. "We still have these accounting questions."
Some credited short-covering, when traders who bet that stocks would fall must buy must back to recoup losses.
"It's a little unclear if this rally is short covering," David Briggs, head trader at Federated Investors, told CNNfn's Street Sweep. "We'll know tomorrow." 
Click here to send mail to Jake Ulick
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