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Dose of good news energizes markets

Investors start buying again as reports from Dell and Alcoa are seen as signs that business is improving at least for some companies.

By HELEN HUNTLEY

© St. Petersburg Times, published April 6, 2001


A dose of good news on earnings provided at least temporary relief from the Wall Street blues Thursday.

Dell Computer Corp. reported it would meet earnings expectations and Alcoa Inc. said it would beat them. In a market depressed by a series of earnings warnings and job cuts, that was enough to spark a vigorous rally.

The battered Nasdaq Composite Index soared 146.20 points, a 9 percent gain that ranks as the third best in Nasdaq history. That put the technology-heavy index at 1,785.00. The Dow Jones Industrial Average climbed 402.63 points, its second largest point gain ever and a 4 percent increase. Closing at 9.918.05, the Dow is now back within easy striking distance of 10,000, last seen three weeks ago.

The broad Standard & Poors 500 index rose 4 percent, closing at 1,151.44, up 48.19 points.

The news that generated the excitement was not especially dramatic, but it gave investors hope that business is improving, particularly for technology companies.

Dell said late Wednesday that it expects to report about $8-billion in revenues for the current quarter, with earnings of about 17 cents a share, in line with analyst expectations. That is important because just two months ago, the computermaker was announcing the first layoffs in company history and warning of a slowdown. Dell stock shot up $3 a share to close at $25.19.

The news on Dell set off a strong rally in technology stocks, with IBM Corp., Microsoft Corp., Hewlett-Packard Co. and Intel Corp. among those showing substantial gains.

Aluminum manufacturer Alcoa also gave investors in the "old economy" something to cheer about with a report Thursday that it earned 46 cents a share in the first quarter, 2 cents more than analysts expected. That stock rose $1.95 to close at $37.50.

"Hopefully this will be a catalyst" for stocks to move higher, said Barry Berman, head trader for Robert W. Baird & Co. in Milwaukee. "You just need to get through this first-quarter reporting period and see a stop in the daily battering of bad news."

While investors enjoyed watching the market go up for a change, many of them were not particularly impressed.

"It's kind of silly that people would react so dramatically because one corporation reports strong earnings and the other just doesn't alter their estimate," said investor Timothy Johnson Jr., a Clearwater lawyer. "That's a flimsy basis for making investment decisions."

He said he doubts that the gains will last.

"I don't get too excited when it goes up like this, and I don't get too disturbed when it goes down," he said. "I might be a fool but at least I'm a calm fool."

Palm Harbor investor Patricia Mabbatt, a retired trust officer, said you have to put Thursday's gains in perspective:

"We've still lost a lot of money in this market. When it's back up to 11,000, then I'll get excited."

The Dow is still down 8 percent for the year, while the Nasdaq Composite Index is down 28 percent.

Clearwater money manager Jon Quigley said it is too soon to declare the bad times are over.

"I doubt that this market will turn around on a dime and head higher," he said. "It's still a bottoming process."

Quigley, a portfolio manager for Advanced Investment Technology, said he thinks some of the large technology companies are good buys. He said investors saw good value in Dell, a company that pioneered direct sales of computers and is known for its ability to adjust to changing market conditions.

"The stock was very cheap," he said. "If you buy companies that are reasonably priced, but that are actually generating earnings and executing their business well, then you can do okay in this market."

However, Quigley said investors should stay diversified, a lesson the Nasdaq's performance has driven home this year.

- Information from Times wires was used in this report.

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