NEW YORK (AP) Bargain hunting yesterday propelled stocks sharply higher after better-than-expected results from Yahoo renewed hopes that business might be improving after all.
Analysts said investors were lured by lower stock prices, particularly in the technology sector after Wednesday’s sell-off. Wall Street also bet that Microsoft and IBM would issue bullish forecasts; but investors were disappointed when both companies indicated at the end of regular trading that conditions are still difficult.
The Dow Jones Industrial Average closed up 137.77, or 1.4 percent, at 9,850.04, rebounding from the 211-point loss the previous session.
Broader stock indicators also advanced. The Standard & Poor’s 500 Index rose 11.31, or 1.0 percent, to 1,138.88. The Nasdaq Composite Index gained 41.38, or 2.1 percent, to 1,985.82.
Although the gains were significant, analysts were quick to note they followed losses in six of the last eight sessions.
“We have a tug of war going on here. The bullish case is that the outlook is brightening. The bears would say that the market … is extended and a little bit expensive,” said Robert Streed, portfolio manager of Northern Select Equity Fund. “What we really will need to resolve this is some broader-based evidence of which companies are actually going to come through and deliver strong earnings.”
In trading yesterday, investors bid Yahoo up $2.25, or 12.6 percent, to $20.12 on better-than-expected earnings and an indication that its ad market appears to have stabilized. Stronger-than-anticipated results from Compaq sent its stock up 70 cents to $11.80, a 6 percent gain.
But after the market closed, investors were reminded of the murkiness of the technology picture. A cautious outlook from Microsoft sent its stock down $1.56 to $68.30 in extended trading, despite a $1.99 gain during the day and earnings that, excluding a one-time charge, exceeded estimates.
IBM posted results that beat expectations but the company indicated that business is still tentative. The stock had gained $2.65 to $119.90 during the day, but did not trade in the late session.
The market’s response recalled trading Wednesday, when investors punished Intel for beating expectations but failing to say a recovery had begun. The chip maker dropped significantly, although it recouped much of its loss yesterday, rising 82 cents to $34.53 during the regular session.
Since recovering from post-terror-attack lows last year, the market has moved higher gradually as Wall Street tries to anticipate when an economic recovery will come. But it has also been subject to setbacks because of the continuing uncertainty.
Fourth-quarter-earnings reports this month have so far offered a mixed assessment of business’ direction, tempting many investors to preserve their gains from the rally rather than risk losing them should a recovery be delayed. Wall Street has also gotten into the habit of driving up a stock price on hopes of strong earnings, and then selling on the news to lock in profits.
“There’s a lot of desire by investors to want to get back into the market. But we need clarity in earnings to really do that and it hasn’t happened,” said Barry Hyman, chief investment strategist at Ehrenkranzt King Nussbaum. “Although the numbers are beginning to indicate a recovery, it’s still too early to make the case that anything is imminent. That means there will be more volatility like we’ve been seeing.”