Wall St. Rally Fueled by Earnings Reports

Surprisingly strong corporate earnings reports and upbeat economic data Tuesday helped spark Wall Street’s biggest rally in more than a month.

The Dow Jones industrials climbed 207.65 points, or 2.1%, to 10,301.32, bouncing back from a net loss of 178 points over the previous six sessions.

The Nasdaq composite index surged 63.01 points, or 3.6%, to 1,816.79 as beaten-down tech and telecom stocks paced a broad advance.

Both the Dow and Nasdaq scored their biggest one-day percentage gains since early March. The blue-chip Standard & Poor’s 500 index rallied 25.82 points, or 2.3%, to 1,128.37--its best day since Sept. 24.

Winners topped losers by more than 2 to 1 on the New York Stock Exchange and by 5 to 2 on Nasdaq in active trading.

After a rocky last four weeks for major market indexes amid concerns about corporate accounting, rising oil prices and Middle East violence, optimism rebounded thanks to robust profit reports from blue-chip firms such as General Motors and Johnson & Johnson and upbeat outlooks from tech and telecom companies, including Texas Instruments and Sprint.

What’s more, confidence in the economy’s recovery was boosted by economic data showing that U.S. industrial output soared last month, analysts said.

But “what really set the fire was forward revenue guidance from tech companies. It’s the first good news in the sector for some time,” said Phil Dow, director of equity strategy at Minneapolis-based brokerage RBC Dain Rauscher. “It seems like all we had been hearing before now was that there was no earnings visibility.”

Chip-industry companies Texas Instruments and Novellus Systems late Monday reported first-quarter earnings and gave surprisingly optimistic forecasts for second-quarter results. The chip industry is considered a bellwether of the tech sector’s prospects.

Novellus jumped $3.06 to $53.46 on Nasdaq on Tuesday while Texas Instruments gained $1.66 to $33.79 on the NYSE.

After markets closed Tuesday, chip leader Intel said first-quarter earnings matched analysts’ estimates. The company gave a second-quarter sales estimate range that exceeded many analysts’ expectations. Intel shares, up $1.40 to $29.51 in regular Nasdaq trading, rose to $31 in after-hours activity.

Dow said earnings reports expected today from firms, including Schlumberger, Boeing and IBM, will offer more clues about the health of U.S. business.

Some analysts expressed caution Tuesday, noting that many strong stock rallies have quickly sputtered this year. The Dow rocketed 173 points last Wednesday, then dived 206 points Thursday.

“This looks like a snap-back from oversold conditions,” said Chip Hanlon, head of the Huntington Beach-based investment advisory firm Unfunds. “Remember the old saying--bear market rallies are more spectacular than bull market rallies. My advice would be, ‘Don’t chase this rally.’ ”

But market bulls noted that the major indexes’ weakness over the last month has masked a continuing advance in many market sectors, particularly in smaller stocks.

On Tuesday, blue chips attracted fresh interest. GM helped lift the Dow, soaring $2.95 to $64.05 after reporting first-quarter profit sharply above analysts’ forecast and raising its full-year earnings estimate for 2002.

Among other blue chips, Johnson & Johnson climbed $1.10 to $63.26 after also reporting better-than-anticipated earnings.

Coca-Cola gained $1.49 to $53.88 after barely missing Wall Street’s first-quarter profit estimates but backing its full-year earnings forecast. But Caterpillar slid $1.34 to $56.65 after reporting first-quarter profit that fell shy of expectations, although the firm stood by its earnings target for the year.

Bargain hunters were out in force in the battered telecommunications sector, where the Amex telecom index rocketed 10.2%. Still, that gain only trimmed the index’s year-to-date loss to 27.1%.

Telecom got a lift as Sprint’s wireless unit Sprint PCS Group reported a narrower-than-expected quarterly loss, and Sprint FON Group, which includes local and long-distance services, said first-quarter earnings topped forecasts. PCS shares zoomed $2.58 to $12.60; FON shares rose $2.79 to $16.26.

Among other telecom names, AT&T; rallied $1.34 to $14.89, Nextel Communications soared $1.48 to $5.95 and WorldCom Group jumped $1.16 to $6.23.

Analysts said “short covering” also may have fueled Tuesday’s advance in battered stocks, as investors who had bet on further price declines scrambled to close out positions. In a short sale, a trader borrows shares and sells them, hoping to buy them back later at a lower price and pocket the difference.

Meanwhile, Treasury yields jumped as investors shifted money into stocks. The yield on the benchmark 10-year T-note rose to 5.19% from 5.14% on Monday.

Near-term crude oil futures prices rose 18 cents to $24.75 a barrel. Gold slipped back below $300, easing $1.20 to $298.80 an ounce, as commodity traders took profits.

Other market highlights:

* Among tech giants, Microsoft rose $2.12 to $57.81 and Cisco Systems added 57 cents to $15.58, bolstering Nasdaq and the S&P; 500.

* Financial stocks had a strong day. Citigroup rebounded $2.19 to $48.11, Mellon Financial rose $1.51 to $38.62, and Goldman Sachs surged $2.99 to $84.59.

* Most foreign stock markets rose, with key indexes up 1.9% in Japan, 2.1% in France, 1.9% in Germany, 1.1% in Britain and 1.1% in Brazil.

Market Roundup, C12-13

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