- The Washington Times - Thursday, December 6, 2001

Hopes for a quick recovery from recession yesterday sent the Dow Jones Industrial Average soaring 221 points to over 10,000 and the Nasdaq Composite Index bounding over 2,000 for the first time since before the September 11 terrorist attacks.
The rally was sparked by signs of stability in the battered technology sector, a rare forecast for a pickup in earnings next year, and a report that the services sector expanded last month after plunging in the wake of the attacks. Coming on top of a string of positive economic news last week, the developments stoked hopes that Wall Street's long bear market is coming to an end.
Yesterday's 2.2 percent gain in the Dow left the blue-chip index 23 percent above the low it set in the week after the attacks. The Nasdaq's comeback has been even more impressive, with the technology-led index surging by 44 percent from its Sept. 21 low. Yesterday's 84-point gain, or 4.3 percent, brought the Nasdaq to 2,047.
Salomon Smith Barney economist Steven Wieting captured the renewed optimism of the markets in a note to clients. He announced that the economy's better-than-expected performance in the aftermath of the attacks prompted him to raise his estimates of profit growth next year.
"U.S. economic growth will recover quite rapidly over the course of 2002," he said, maintaining that his more-pessimistic forecast right after the attacks was "a bit too drastic." Mr. Wieting raised his forecast of per-share profits for the Standard & Poor's 500 companies to $47.50 from $46.50.
In another sign the economy may be on the mend, a report from the National Association of Purchasing Management yesterday showed an expansion last month in the nation's broad services sector, which accounts for about 60 percent of economic activity. The association's measure of services activity had plunged to a record low in October.
Larry Ellison, the chief executive of Oracle Corp., a leading software company, also fueled optimism by telling investors that his business has "stabilized" after a sales decline. He expects growth to resume next year.
That sent technology stocks up across the board, with Oracle, Microsoft, Intel and other technology firms posting sizable gains.
As the rally has gained momentum in recent weeks, many investors who had been storing their money in cash deposits have jumped back into stocks out of fear of missing what could be the start of the next bull market. The flow of cash into the market has given a powerful lift to prices.
"Money wants into the stock market, no matter what market gurus may say," said Alfred Goldman of AG Edwards.
But some analysts say investors are putting too much stock into what may be only a temporary rebound in the economy from lows set after the terrorist attacks.
"It worries me to see this kind of enthusiasm and optimism for technology stocks right now," said Chuck Hill of First Call/Thomson Financial. "I don't think technology companies will bounce back any time soon, given the current overcapacity in the sector."
With exports falling, employment shrinking and recession spreading around the globe, economists say it is far too soon to declare the recession over.
"The markets now fully expect that recession will give way to recovery," said Richard Berner, economist with Morgan Stanley Dean Witter. "We think they've jumped the gun on recovery, and investors also are overestimating the rebound in earnings that recovery eventually will bring."
A report ignored by the market yesterday revealed another 181,412 layoffs last month. John Challenger, president of Challenger, Gray and Christmas, the Chicago firm that compiles layoff figures, said the big job cuts in November dashed his hopes that the job market would bounce back and stabilize after the attacks.
"In the eight years we have tracked job-cut data, the downsizing for the last three months has been at levels never seen before," he said. Layoffs so far this year total 1.8 million and are running three times ahead of last year, he said.

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