- The Washington Times - Wednesday, October 16, 2002

Stocks soared yesterday as encouraging earnings news stoked one of the most powerful rallies in decades, with the Dow Jones Industrial Average leaping 378 points to 8,256.
Wall Street's fourth day of solid gains since reaching five-year lows last week shook skeptics and increased hopes among investors that the worst of the grueling, 2-year bear market might be ending.
"This is looking like a sustainable rally," said Doug Cote of ING Aeltus Asset Management Inc., noting that the gains yesterday were fueled by better-than-expected earnings news from such leading U.S. companies as General Motors Corp., Citigroup and Johnson & Johnson.
"Earnings are what matter," he said. The rally added nearly 5 percent to the Standard & Poor's 500 Index, the Nasdaq Composite Index and the Dow. It came in the face of disappointing economic news about sales and inventories at the nation's businesses.
"There is short-term momentum to this market," said Michael Farr, president of Farr, Miller & Washington LLC. "The only thing I can't figure is its life expectancy."
The Dow has racked up nearly 1,000 points since Thursday, and the S&P; has seen its largest gains since 1974. But investors have seen big rallies such as these fizzle as hopes for an improving economic outlook were dashed by various developments during the past two years.
Still, the breadth and speed of the rally, with nearly 2 billion shares trading hands on the New York Stock Exchange, convinced some analysts that the market has turned for the better at least for now.
Bonds yesterday suffered their biggest losses in six years driving up long-term interest rates as investors took money out of safe-haven Treasury bonds and poured them into stocks to take advantage of the rally.
Citigroup shares jumped 13 percent to $34.14 after the world's largest financial company said that a mortgage refinancing boom had boosted profits beyond expectations. The bank's shares had fallen by half this year because of involvement in various scandals.
Bank of America, which also beat expectations, jumped $5.04 to $65.75. Other banks, from Bank One Corp. to Wells Fargo & Co., climbed on higher quarterly earnings. Insurance stocks rose amid reports that they were raising rates to cover losses.
Johnson & Johnson advanced $1.73 to $59.56 after reporting higher-than-anticipated profits and raising its forecast for the year.
"Perhaps what we've seen recently is that companies have managed expectations so low that you can't see anything but surprises," said Steve Frantz, chief investment officer at First National Bank of Omaha.
Responding to hints from corporate executives, Wall Street analysts have sharply scaled back their estimates of third-quarter profits. They are now expected to increase by an average of 5.2 percent, according to Thomson First Call.
General Motors climbed 10 percent after saying its profits from operations rose 15 percent. That was before it wrote down its investment in the Italian car maker Fiat, which resulted in a loss.
Even shares of Delta Air Lines Inc., which reported a third-quarter loss, jumped 21 percent because the red ink was less than expected due to cost cutting. Delta executives warned that the airline industry is flirting with bankruptcy.
"One thing that stands out to me is the cost cutting that has been involved," said Larry Wachtel, market commentator with Prudential Securities. "There is this awareness that we can live with a moderate economy, because costs have come down so much."
Yesterday was the first big day of earnings reports from major companies, with dozens more scheduled this week.
Some profit taking after the huge gains seems likely today. News from technology bellwether Intel Corp., after the close of trading, that its profits fell short of forecasts could feed selling.
Intel shot up $1.42 to $16.52 in the session yesterday, but it fell back $2.04 to $14.48 in after-hours electronic trading. Other stocks also fell in the extended session, with Dell Computer off 99 cents at $26.55, after having risen 89 cents during regular trading.
Microsoft was down $1.89 at $50.40 in after-hours trading, wiping out part of a $3 regular session advance.
This story is based in part on wire service reports.

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