Reports drive surge in stocks

Expectations of quarterly profits spur investment

Nasdaq up record 254.41

Dow, S&P also gain

about 1 billion shares traded on Big Board

Wall Street

April 19, 2000|By BLOOMBERG NEWS

NEW YORK -- The Nasdaq composite index soared to its second-largest gain on record, as investors bought shares of large technology companies on optimism they'll report robust first-quarter profit growth.

Microsoft Corp., scheduled to report tomorrow, led stocks' gains, while Intel Corp. and International Business Machines Corp., which reported after exchanges closed yesterday, also rose.

Industrial, consumer and financial companies, including Johnson & Johnson, Pfizer Inc., Delta Air Lines Inc. and State Street Corp., advanced after beating profit estimates, driving rallies in the Dow Jones industrial average and Standard & Poor's 500 index.

Investors who might have feared a further slide after last week's market plunge "can step back and say, `Hell's bells, earnings are wonderful, and the economy is great,'" said Donald Coxe at Chicago-based Harris Investment Management Inc., which oversees about $12.5 billion.

The Nasdaq rose 254.41, or 7.19 percent, to 3793.57, extending yesterday's surge and wiping out Friday's 9.67 percent loss. The index has risen 14 percent this week, the biggest two-day percentage advance in its 29-year history. The only time it had a bigger one-day percentage gain was Oct. 21, 1987, two days after the stock-market crash. Yesterday's rally also marked the Nasdaq's largest point gain ever.

The Dow gained 184.91, or 1.75 percent, to 10,767.42. The S&P 500 climbed 40.17, or 2.87 percent, to 1,441.61. Almost two stocks rose for every one that fell on the New York Stock Exchange.

About 1.1 billion shares changed hands on the Big Board, even with the three-month daily average. About 2 billion shares traded on the Nasdaq stock market, according to preliminary figures.

Nasdaq stocks traded for an average 407 times recent earnings when the index set its March 10 record high. After Friday's decline, they traded for 139 times earnings.

"Investors look at what the prices of these stocks are now compared with a month ago, and they're very cheap," said Coxe, who has been adding to his holdings of Merck & Co. and Delta.

For a second day, stocks surged in the last 30 minutes of trading, as investors took the market's resilience as a sign that the worst of the decline is over, said Michael Lyons, a trader for Morgan Stanley Dean Witter & Co.

Elsewhere on the broad market, the Russell 2000 index, a benchmark of small-cap stocks, rose 26.83 to 486.09; the Wilshire 5000 index jumped 479.38 to 13,328.96; the American Stock Exchange composite index advanced 28.39 to 877.36; the New York Stock Exchange composite index climbed 14.60 to 634.81; and the S&P 400 midcap index added 16.03 to 462.69.

The Sun-Bloomberg Maryland index of the top 100 Maryland stocks gained 17.94 to 226.01, led by Aether Systems Inc., which jumped $38.1719 to $109.4219, and MedImmune Inc., which rose $15 to $151.

Intel last traded at $124.50 in after-hours trading, down from its closing price of $129. The world's No. 1 chipmaker reported first-quarter profit of 78 cents a share, beating the average estimate of analysts surveyed by First Call Corp. by 9 cents. Still, the stock might have reflected the outlook for earnings, as Intel had gained $6 in regular trading.

Microsoft rose $4.6875 to $80.5625. It's expected to report 17 percent per-share profit growth.

Companies in the S&P 500 are expected to report average first-quarter profit growth of 20.7 percent, up from the estimate of 17.5 percent at the beginning of the year, according to First Call. Among the 138 companies to report, profit growth has averaged 24.6 percent from the year-earlier quarter. About 72 percent of the companies that have reported have beaten analysts' estimates, 22 percent have matched and 6 percent have fallen short. This is the busiest week for first-quarter earnings reports.

While technology stocks led the rally yesterday, investors have also been buying shares of consumer and industrial companies with relatively low price-earnings ratios. The best performers in the S&P 500 for the past week include Avon Products Inc., Delphi Automotive Systems Corp. and FirstEnergy Corp.

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