graphic
graphic  
graphic
Markets & Stocks
graphic
Stocks make a go of it
Major indexes close higher, but off best levels, on news of Bush action on ports, short-covering.
October 8, 2002: 5:57 PM EDT
By Alexandra Twin, CNN/Money Staff Writer

NEW YORK (CNN/Money) - U.S. stocks closed higher Tuesday, but well off their best levels, with traders covering short positions on news that the Bush administration will seek a court order to reopen the West Coast ports, ending the lockout.

The stocks of companies that were particularly vulnerable to the impact of the port lockout, such as those in the retail and transportation sectors, registered the strongest gains.

The Dow Jones industrial average (up 78.65 to 7501.49, Charts), Nasdaq composite (up 9.81 to 1129.21, Charts) and Standard & Poor's 500 index (up 13.27 to 798.55, Charts) all closed out the volatile session modestly higher, cutting their gains in half.

"The market lifted on an anticipated resolution of the port issue," said Peter Green, market analyst at MKM Partners. "But it's a very temporary thing; it's not going to lift us out of any of the nervousness that's been pulling markets lower. It's a one-day love affair."

Biotech Genentech (DNA: up $1.09 to $32.55, Research, Estimates), Web search engine Yahoo! (YHOO: up $0.43 to $9.51, Research, Estimates) and memory chipmaker Rambus (RMBS: up $0.12 to $4.10, Research, Estimates) are among the companies due to report results Wednesday. There are no economic reports due until Thursday

Analysts attributed the late rally Tuesday mostly to big program trades and short-covering, a process in which investors who have sold shares short to take advantage of a falling market need to buy them back.

"I think it's unlikely that it's the retail investor causing this kind of action. You can pretty much bet it's program traders," said Robert Philips, chief investment officer at Walnut Asset Management.

"I think the longshoremen development [at West Coast ports] is pretty important, because if left alone, it would be a tremendous drag on the U.S. economy," Philips added.

Stocks had seesawed earlier as investors weighed the competing influences of reassurance from the Bush administration on geopolitical concerns and weakness in the auto and utilities sectors.

But investors seemed to find comfort in news reports that the Bush administration would seek a court order reopening West Coast ports under the Taft-Hartley Act, following the recommendation of a panel appointed by the president. The ongoing labor dispute and subsequent distribution delays are costing the U.S. economy up to $2 billion a day, experts estimate.

The reports were confirmed in a speech by the president shortly before the close of trade.

In addition, just before the president's speech, the longshoremen's union said that its members would go back to work Wednesday in a 30-day contract extension.

Retailers and financials on the rise

Dow retailers Wal-Mart Stores (WMT: up $2.25 to $52.60, Research, Estimates) and Home Depot (HD: up $1.04 to $25.25, Research, Estimates) surged, pulling the blue chip indicator up in tandem.

Shares of American Express (AXP: up $1.80 to $28.40, Research, Estimates) and Citigroup (C: up $1.11 to $27.84, Research, Estimates), both Dow components, joined other financial services companies in rebounding after being hit hard Monday on a series of brokerage downgrades and amid other concerns.

News that Lehman Brothers raised its rating on the U.S. large-capitalization pharmaceutical group to "positive" from "negative" inspired selective buying in the drug sector. Lehman said in its note that it sees better business visibility in 2003 profits and good news on new drug approvals and filings in the fourth quarter of 2002.

Merck (MRK: up $1.87 to $46.00, Research, Estimates), a Dow component, and Eli Lilly (LLY: up $2.78 to $59.60, Research, Estimates) were among the major drug companies that rallied on the call.

Shares of PepsiCo (PEP: up $5.32 to $41.10, Research, Estimates) surged after reporting third-quarter earnings per share that topped estimates and grew from the same period a year earlier.

Autos, utilities still under pressure

But automakers remained under pressure after the CEO of General Motors (GM: down $2.28 to $33.60, Research, Estimates), a Dow component, told an Italian newspaper that he expects 2003 vehicle sales to fall because the economy won't pick up until the middle of the year. However, GM is not changing its own profit forecasts for the time being.

Credit Suisse First Boston downgraded the automotive sector to "market weight" from "over-weight." In addition, Morgan Stanley cut its production forecast for GM, Ford Motor (F: down $0.75 to $7.75, Research, Estimates) and DaimlerChrysler (DCX: down $0.65 to $32.24, Research, Estimates) within a broader note on the auto and auto parts sector. The firm said weak September sales have pushed inventory back to normal levels, so there won't be as much build-up.

The utilities sector fell sharply after Allegheny Energy (AYE: down $3.72 to $3.80, Research, Estimates) said it was in default under its credit agreement and would miss estimates for 2002 and 2003 and TECO Energy (TE: down $1.38 to $13.04, Research, Estimates) said 2002 and 2003 earnings per share would be hurt by a new common stock offering.

"The utilities are really breaking down today [Tuesday]," said Matt Ruane, head of listed trading at Gerard Klauer Mattison. "They were seen as a safe haven play and now you have people worrying about dividends being cut across the board."

Merrill Lynch also downgraded tobacco products maker Philip Morris (MO: down $2.36 to $36.22, Research, Estimates), a Dow component, to "neutral" on continued concerns about the company's litigation risk following a $28 billion award against the company by a California jury last week.

Both Merrill Lynch and Bear Stearns cut their October quarter and fiscal 2003 profit estimates on No. 1 networking gear maker Cisco Systems (CSCO: down $0.48 to $8.60, Research, Estimates), citing the continued weakness in the market for Cisco's products.

Treasury prices fell a little, pushing the 10-year note yield up to 3.62 percent. The dollar was stronger against the euro and little changed against the yen.

Light crude oil futures fell from their recent run-up, losing 16 cents to $29.48 a barrel in U.S. trading. Gold fell sharply.

Market breadth was negative. On the New York Stock Exchange, losers edged winners as 1.91 billion shares changed hands. On the Nasdaq, decliners edged advancers 6-to-5 as 1.81 billion shares traded.  Top of page




  More on MARKETS
Why it's time for investors to go on defense
Premarket: 7 things to know before the bell
Barnes & Noble stock soars 20% as it explores a sale
  TODAY'S TOP STORIES
7 things to know before the bell
SoftBank and Toyota want driverless cars to change the world
Aston Martin falls 5% in its London IPO




graphic graphic

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.

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.