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Stocks Rally at 3rd Quarter's Finish Line

Wall St.: Broad-based surge helps major indexes shake the gloom caused by weeks of earnings warnings. But Apple strikes sour note.


Wall Street came up with a 2% solution Thursday to try and avoid a second-straight losing quarter for the main blue-chip market index.

Stocks staged a broad rally, driving the Standard & Poor's 500 index up 2.2% to 1,458.29 and putting it narrowly back in the black for the third quarter, which ends today.

Amid end-of-quarter portfolio shuffling by large fund managers, the beaten-down Nasdaq composite index also rebounded after sliding for five sessions. Nasdaq jumped 122.02 points, or 3.3%, to 3,778.32 in heavy trading.

The Dow Jones industrials surged 195.70 points, or 1.8%, to 10,824.06.

Traders said Wall Street was overdue for a snap-back, after the pummeling of the last few weeks.

The market has been hammered by a continuing barrage of earnings warnings from major companies struggling with soaring energy costs, a weak euro currency and a slowing U.S. economy.

Indeed, another technology giant--Apple Computer--joined that chorus late Thursday, warning after regular trading ended that weaker-than-expected sales would depress earnings in the current quarter.

Though technology stocks rallied Thursday with much of the rest of the market, Apple's announcement could set a poor tone for the quarter's final trading day.

Through Thursday the Nasdaq composite was down 4.7% in the third quarter, following a 13.3% dive in the second quarter, which encompassed the tech sector's spring crash.

But the S&P 500--the market measure to which hundreds of billions of dollars of investors' funds are tied via S&P index funds--now is up 0.25% in price so far in the third quarter, thanks to Thursday's rally.

The S&P had fallen 2.9% in the second quarter after rising 2% in the first quarter.

Year-to-date the S&P still is in the red, off 0.8%. The Nasdaq composite is down 7.2% for the year, while the Dow is down 5.9%.

The market got a boost Thursday from Procter & Gamble's announcement that its earnings in the current fiscal year will be at the high end of analysts' forecasts.

Beaten-down P&G, one of the 30 Dow stocks, soared $5.19 to $66.94 in relief. Given the lengthening list of multinational consumer products companies warning that earnings would be hurt by the weak euro, P&G's announcement was a happy surprise.

"We've gone through the period where people have to warn, and the bad news is now out of the way," Mike Green, a money manager at Benham & Green Capital Management in La Jolla, noted on Bloomberg News. Investors now will "focus on earnings and the value in the market--the lower prices are attracting buyers."

Other analysts aren't so sure the market is poised to turn. For one, it isn't clear that earnings pre-announcements have crested.

But falling oil prices could help boost market sentiment: Near-term crude futures in New York slid $1.12 to $30.34 a barrel Thursday after Saudi Arabia said it wants to keep prices under control. Natural gas prices also tumbled.

The euro currency's fate, however, remains up in the air. The euro weakened modestly Thursday after Danish voters rejected the idea of joining the common currency.

Still, Wall Street's rally was convincing: Winners topped losers by 19 to 10 on the New York Stock Exchange and by 25 to 14 on Nasdaq. Nasdaq volume reached 2 billion shares.

Though earnings growth is unquestionably slowing, it's still expected to be in the 16% range, overall, this quarter for companies in the S&P 500 index, according to analysts' estimates as tracked by First Call/Thomson Financial.

If oil prices drift lower, the euro holds steady and U.S. interest rates stay in their current range or go lower, Wall Street's bulls say the market could find its legs for a fourth-quarter rally.

Among Thursday's highlights:

* The Dow was bolstered by its financial stocks, as some portfolio managers looked for issues that have already done well this quarter. J.P. Morgan gained $5.25 to $166.44, Citigroup jumped $2.31 to $53.44 and American Express gained $2.19 to $60.94.

* Biotech stocks resurged, lifting the American Stock Exchange biotech index to a record close--surpassing the previous record set March 6. Winners included Chiron, up $2.50 to $46.31; Human Genome Sciences, up $13.88 to $179.81; and Myriad Genetics, up $13.69 to $92.69.

* Bristol-Myers Squibb rose $1.50 to $58. The company said it will meet or exceed profit forecasts next year and will divest its Clairol beauty care business and Zimmer unit to focus more on drugs.

* Utility stocks, another hot sector in the third quarter, mostly rallied again, lifting the Dow utilities index 1.3%. But Edison International, parent of Southern California Edison, fell further, losing 13 cents to $19.75. The stock has been crushed in recent days on concerns about the company's finances as it struggles under California's power-industry deregulation.

* In the tech sector most major names rallied in regular trading, but gave up much of their gains in after-hours trading, following Apple's warning. IBM rose as high as $118.88 in regular trading but was down $2.75 to $115.25 in after-hours activity. Some chip and telecom stocks were big winners. Applied Micro Circuits jumped $11.31 to $214 in regular trading; Lucent Technologies rose $3.19 to $31.75.

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