- The Washington Times - Wednesday, March 29, 2006

Tech shares gain amid optimism over earnings

BLOOMBERG NEWS

U.S. stocks staged the broadest rally this year, sending the Nasdaq Composite Index to a five-year high, on confidence that profit growth will persist in the face of rising interest rates.

Google Inc. led gains among computer-related shares, extending a surge that began after the Internet search engine was selected to join the Standard & Poor’s 500 Index six days ago. Companies whose earnings are closely tied to economic growth, including 3M Co. and Alcoa Inc., also climbed.

The market bounced back from a slump Tuesday that followed the Federal Reserve’s 15th straight interest-rate increase and policy-makers’ suggestion that rates will keep moving higher.

Investors are “looking forward to those underlying earnings and the strength of the economy, the resiliency we’ve seen,” said Noel Lamb, chief investment officer of Russell Investment Group in Tacoma, Wash., which manages more than $155 billion. “That’s why I think we’ve seen the rebound.”

The S&P; 500 added 9.66, or 0.8 percent, to 1302.89. It lost 0.6 percent Tuesday. The Dow Jones Industrial Average climbed 61.16, or 0.6 percent, to 11,215.70. The Nasdaq rose 33.32, or 1.5 percent, to 2337.78, a level not seen since Feb. 2001.

The Russell 2000 Index of small-capitalization stocks (companies in the index have a median market value of $645 million) rallied 1.7 percent to 764.17.

Nine stocks rose for every two that fell on the New York Stock Exchange, the highest ratio since Dec. 1. About 1.58 billion shares changed hands on the Big Board, 5.4 percent less than the three-month daily average.

First-quarter earnings for S&P; 500 companies are expected to exceed 10 percent for the 11th straight quarter, according to Thomson Financial data. Profits may increase 10.2 percent after expanding 14.6 percent last quarter, when 64 percent of S&P; 500 companies reported profit that surpassed analysts’ estimates.

“I’m feeling reasonably constructive about the markets,” said Leo Grohowski, chief investment officer at U.S. Trust Corp. in New York, who oversees $108 billion. “Earnings look solid. First-half earnings could likely continue a trend” of beating analysts’ estimates, he said.

Google jumped $17.78 to $394.98. The S&P; said last week that the stock will join the S&P; 500, replacing Burlington Resources Inc. after the close of trading tomorrow. The company also said it signed an agreement first brokered in December to invest $1 billion in Time Warner Inc.’s America Online unit. Time Warner added 5 cents to $16.79.

Sun Microsystems Inc. climbed 22 cents to $5.25. The world’s No. 4 maker of servers is likely to announce a cost-cutting plan that will improve profit and may lift the shares to $6 in six months to 12 months, Morgan Stanley analyst Rebecca Runkle wrote in a note. Miss Runkle raised the stock to “overweight” from “underweight.”

Apple Computer Inc. jumped $3.62, or 6.2 percent, to $62.33 for the biggest jump in two months on speculation that antitrust troubles for Microsoft Corp. in Europe over its new operating system may benefit Apple, which makes computers that run on a rival system. The European Committee for Interoperable Systems filed a complaint that Microsoft’s Vista will illegally bundle security and copy-protection software.

Computer-related shares increased 1.6 percent, the best performance among 10 industry groups in the S&P; 500.

Economically sensitive stocks such as industrial companies and raw-material producers also paced the market’s advance.

3M gained $1.26 to $77.56. The maker of more than 50,000 products as varied as Scotch tape and cancer drugs was raised to “buy” from “neutral” by Merrill Lynch analyst John G. Inch, who said 3M is positioned to benefit from faster international economic growth. Lynch also cited confidence in Chief Executive Officer George Buckley in a note to clients.

A measure of industrial stocks rallied 0.7 percent, while a gauge of raw-material shares advanced 1.2 percent. Alcoa, the world’s No. 1 aluminum producer, increased 54 cents to $30.71. Freeport-McMoRan Copper & Gold Inc., which owns the world’s biggest gold mine, jumped $3 to $59.70.

Boeing Co. rose $1.67 to $79.18. The world’s No. 2 maker of commercial aircraft said it won an order for as many as 60 of its 737 jets valued at $4 billion from General Electric Co.

“It’s all in energy, industrials, infrastructure,” said Caryn Zweig of Abner, Herrman & Brock Inc. in Jersey City, N.J. “The demand in those areas is exceptionally strong, which could bring you much higher earnings growth than is anticipated by the stock market today.”

Maytag Corp. surged $4.73, or 28 percent, to $21.81 after the U.S. Justice Department approved its $1.68 billion takeover by rival appliance maker Whirlpool Corp. Whirlpool rallied $6.38 to $95.95.

A gauge of real estate companies climbed 1.8 percent, extending its first-quarter rally to 16 percent, the best among 24 industry groups in the S&P; 500.

Boston Properties Inc. jumped $6.25 to $96.87, while Kimco Realty Corp. rallied $2.65 to $41.40 after S&P; said the two REITs would join the index.

General Motors Corp. fell 60 cents to $22.15 for the biggest drop in the Dow average. The world’s largest automaker disclosed that federal regulators subpoenaed records on supplier credits and metals contracts. The United Auto Workers also rejected a contract offer from Delphi Corp., increasing the risk of a strike at GM’s largest supplier.

Lear Corp. climbed $1.54 to $18.49 after the top maker of auto interiors got $800 million in loans and agreed to put almost all its European interiors operations into a venture with investor Wilbur Ross’ WL Ross & Co.

TD AmeriTrade Holding Corp. added $1.80 to $20.96. The company said earnings for the fiscal second quarter will exceed its earlier estimate of as much as 28 cents a share because of a surge in trading volume.

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