Blue-chip stocks rose Thursday amid growing hopes for another interest rate cut from the Federal Reserve, but technology shares were weak on persistent uncertainty about the sector's earnings prospects.
Hopes mounted that the Fed will cut interest rates again at its next policy meeting May 15 after the latest economic data showed first-time unemployment claims at a five-year high.
"The unemployment rate is going to be rising," said Barry Hyman, chief investment strategist at Ehrenkrantz King Nussbaum. "But it's giving more room for the Fed to continue doing what they have to do, which is cut rates in May. And they will do that."
The Dow Jones industrial average rose 67.15 points, or 0.6%, to 10,692.35 and the broader Standard & Poor's 500 index gained 5.77 points, or 0.5%, at 1,234.52. Advancing stocks led decliners by a healthy margin of nearly 2 to 1 on the New York Stock Exchange.
The technology-heavy Nasdaq composite index fell 24.92 points, or 1.2%, to 2,034.88, after rising 1.5% earlier. Still, advancers edged decliners by a 21-17 margin on Nasdaq.
Tech investors got a promising outlook from phone giant WorldCom, which rose 35 cents to $19.74, but a gloomy forecast from Qualcomm. The wireless technology company's shares fell $4.93 to $58.05.
Federal Reserve Bank of San Francisco President Robert Parry put a damper on bullish sentiment, saying he expected the turnaround in the sluggish U.S. economy to take longer than some expect. He said the economy would grow at a faster pace by year's end.
"Parry is reminding us that we are not out of the woods yet," said Tom Sparico, stock trader at Bengal Partners in Stamford, Conn.
The economic slump is spurring layoffs nationwide. The Labor Department said initial jobless claims rose to the highest level since March 23, 1996.
The Dow was helped by a surge in interest rate-sensitive financial stocks such as J.P. Morgan Chase, which rose $1.02 to $48.50, and American Express, which climbed 80 cents to $41.90.
Bonds also rallied. The yield on the benchmark 10-year Treasury note, which moves opposite to its price, fell to 5.19% from 5.25% on Wednesday.
Investors have been scouring corporate scorecards this week--the busiest period of the earnings season--for hints that the nation's economy is recovering after the Fed slashed interest rates four times this year.
A slew of upbeat earnings reports came from the energy sector as the companies benefited from sharply higher oil and natural gas prices. Investors poured money into the sector, sending the Philadelphia oil services index up 5.4%.
Among those, Halliburton, the world's No. 1 oil-field services company, jumped $3.51 to $42.13 as its profit more than tripled. BJ Services soared $3.58 to $79.48 as its international revenue helped push earnings sharply higher.
On the downside, shares of Thousand Oaks-based Amgen fell more than 4% to $53.46 in after-hours trading after the biotech company lowered its 2001 per-share earnings estimate. Shares of coffee retailer Starbucks slid 11% to $35.50 in after-hours trading after the company cut its sales forecast for this year.
Burbank-based jewelry maker OroAmerica inched up 18 cents to $12.54. The company said Wednesday that it agreed to a $14-a-share takeover by rival Aurafin, but the deal still needs shareholder approval.
Wall Street awaits preliminary gross domestic product data for the first quarter, due ahead of the opening bell today. Economists expect growth of 1.1% for the January-March period, compared with 1% in the preceding quarter.
The market also will tune in keenly to a speech by Fed Chairman Alan Greenspan, set for early today.
Market Roundup, C7-8