Rally fizzles on Wall St
Reassuring words from Federal Reserve Chairman Alan Greenspan gave the US stock market a lift today but the rally fizzled after an analyst lowered earnings estimates for Cisco, prompting nervous investors to collect profits.
The volatility, which left prices mixed, fitted the pattern of recent weeks that has seen stocks advance and then fall back amid conflicting signs of economic recovery and corporate profitability.
The Dow Jones industrial average rose nearly 140 points after Greenspan spoke to Congress, then fell into negative territory before recovering to register a gain of 12.32, or 0.1%, to 10,127.58.
Broader stock indicators were mixed. The Standard & Poor’s 500 index eked out a 0.51 gain to 1,109.89, while the tech-heavy Nasdaq composite was off 14.98 at 1,751.88.
Greenspan told Congress he sees increasing signs that the recession is coming to an end, although he cautioned that the recovery would not be robust.
Also today, the Commerce Department reported that factory orders for durable goods rose more than expected in January, the latest sign that the manufacturing sector might be pulling out of its slowdown.
Investors reacted to the news positively, then began selling after Stephen Koffler, an analyst at Wachovia Securities, lowered his estimate for Cisco System’s third-quarter results to reflect continued cuts in capital spending by telecommunications service providers.
Cisco fell dlrs 1.26, or more than 8%, to dlrs 14.24.
Other high-tech companies also fell. Emulex dropped dlrs 3.48, or more than 9%, to dlrs 33.52. Sun Microsystems was off 35 cents at dlrs 8.66, while Intel was down 13 cents at dlrs 29.89 and Microsoft was down 16 cents at dlrs 58.39.
Financial stocks rose broadly on the good economic indicators.
Citigroup was up 44 cents at dlrs 44.24, while American Express rose 53 cents to dlrs 35.77.
The troubled biotech company ImClone surged on reports that the Food and Drug Administration might not require the company to make a new clinical trial for its cancer drug Erbitux.
ImClone rose dlrs 5.01 to dlrs 20.53. The stock had been badly beaten after the FDA declined to even review ImClone’s application for Erbitux in December, saying crucial data were missing.
Bristol-Myers Squibb, which has a deal with ImClone to market Erbitux, also rose, gaining dlrs 1.98 to dlrs 47.49.
Clear Channel Communications fell dlrs 2.09 to dlrs 47.00 after the major radio broadcaster reported a sharply wider net loss for its fourth quarter due to acquisition related expenses.
Advancing shares led declining shares by 3-to-2 on the New York Stock Exchange, and volume was moderate.
The Russell 2000 index of smaller companies ended up 1.32 at 472.61.
