- The Washington Times - Friday, July 13, 2001

NEW YORK (AP) Investors starved for good news sent stocks soaring yesterday on weak earnings reports that provided just enough hope that a business turnaround will come sooner rather than later.

The Dow Jones Industrial Average and the Nasdaq Composite Index each surged by triple digits in their biggest rallies in two months.

The gains, sparked by an upbeat revenue forecast from Microsoft, allowed Wall Street to build on momentum from earnings reports from Yahoo and Motorola that were lackluster but better than expected.

While investors cheered, analysts were more cautious, noting that Wall Street rallied prematurely last spring only to realize the market's troubles weren't over.

"This comes on the heels of a fairly significant sell-off in the market, so I think these gains are just a reaction to some good news," said Nick Sargen, global market strategist at JP Morgan Private Bank. "It's way too early to say this is a turnaround in the market."

The market's major indexes all scored their biggest point gains since mid-May.

The Dow soared 237.97 or 2.3 percent to 10,478.99. The Nasdaq rose 103.70 or 5.3 percent to 2,075.74 and the Standard & Poor's 500 Index rose 27.96 or 2.4 percent to 1,208.14.

Microsoft led the rally, rising $5.10 to $71.60 after the software maker said its fiscal fourth-quarter revenue would come in above expectations.

Yahoo and Motorola, which reported quarterly results slightly ahead of expectations, advanced despite indications that business might be weak in the coming months. Yahoo gained $1.23 to $18.26 after saying late Wednesday it expected third-quarter results to break even. Motorola, which lowered estimates for the next two quarters yesterday, gained $2.48 to $18.15.

Investors also rewarded General Electric, sending it up $2.39 to $47. The conglomerate met expectations with second-quarter earnings that rose 15 percent on strong performances in its financial services and power systems divisions.

The enthusiasm spread to retailers, even those that reported disappointing monthly sales yesterday. AnnTaylor Stores rose $1.38 to $32.78, despite reporting a 12.3 percent decline in June sales at stores open at least a year. AnnTaylor also lowered its earnings projections for the second quarter.

There was one weak spot: pharmaceuticals, a sector that usually suffers when investors shift money into technology stocks. Schering Plough was off 47 cents at $35.80, while Merck dropped $1.36 to $61.

Now that the Federal Reserve has cut interest rates six times this year, investors are increasingly looking to corporate profitability and performance as the best indicator that the weakened economy is reviving.

The market is especially interested in the technology sector, which has taken the biggest beating over the past year as Wall Street punished companies that failed to deliver profits or at least the potential of profitability.

The news from Yahoo and Motorola appeared to boost investors' confidence that the business environment was at least stabilizing.

But Wall Street always buys on companies' future, rather than immediate, performance. In this case, investors are buying stocks that they think will pay off in six to 12 months, so immediate results are less important than the look down the road.

Some market experts think that gamble, like the market's gains of the spring, might be premature.

"Companies are still saying there's no visibility about when things will improve," said Phil Dow, managing director of equity strategy at Dain Rauscher Wessels. "We will see an economic turnaround by the first half of next year, but not before then."

Also yesterday, the Labor Department said new claims for state unemployment insurance jumped last week to the highest level in nine years. Analysts attributed some of the increase to temporary shutdowns in the auto industry which occur annually as assembly lines are retooled.

Advancing issues led decliners about 2 to 1 on the New York Stock Exchange. Consolidated volume came to 1.60 billion shares, compared with nearly 1.61 billion Wednesday.

The Russell 2000 index was up 13.21 at 489.04.

Overseas, Japan's Nikkei stock average rose 3.4 percent. European investors were also in a buying mood. Germany's DAX index advanced 1.5 percent, Britain's FT-SE 100 rose 1.7 percent, and France's CAC-40 gained nearly 1.0 percent.

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