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'Old-Economy' Stocks Lead Wall St. Rally

March 08, 2001|From Times Staff and Wire Reports

Buyers dominated on Wall Street for a third straight day Wednesday, giving major market indexes their longest winning streak of the year.

But technology stocks were mixed as Yahoo shares were suspended for most of the day, pending news. After the market closed, the leading Internet portal warned it only will break even this quarter.

"Old-economy" stocks led Wednesday's rally, egged on by optimism about another Federal Reserve interest rate cut. The market also got a lift from Goldman Sachs market strategist Abby Joseph Cohen's recommendation that clients boost their stock holdings.

The Dow Jones industrials jumped 138.38 points, or 1.3%, to 10,729.60, while broader market indexes posted more modest gains. The New York Stock Exchange composite index rose 0.6%.

The Nasdaq composite index, which rebounded 4.1% in the first two days of this week, after hitting a 26-month low Friday, added 19.49 points, or 0.9%, to 2,223.92 on Wednesday.

Nasdaq struggled for much of the day to keep its gain. Winners topped losers by a narrow 20-17 margin as many semiconductor and networking stocks slipped after rallying Monday and Tuesday.

Still, "the encouraging thing was that the Nasdaq was even up [Wednesday] given all the bad news about earnings," said Rafael Tamargo, director of equity research at Wilmington Trust.

Late Tuesday, chip maker Broadcom slashed its sales and earnings estimates for the near term. The stock plunged $7.63 to $40.25 on Wednesday.

"All of our largest customers have announced that their demand . . . weakened," Henry T. Nicholas III, Broadcom's chief executive, said Wednesday at an investment conference in Dana Point.

Among other chip firms, Texas Instruments fell $1.34 to $34.76, Cypress Semiconductor lost 68 cents to $19.83 and PMC-Sierra slid $1.56 to $38.06.

Also, fiber-optics firm JDS Uniphase fell $1.06 to $26.94 after issuing an earnings warning late Tuesday.

After trading ended, Tibco Software and communications equipment supplier Tellabs joined the chorus of tech firms warning about weak results.

The market's strength Wednesday was in old-economy names. Bank stocks gained as Treasury bond yields slid in the wake of a Federal Reserve economic report that seemed weak enough to justify additional rate cuts, analysts said.

The five-year T-note yield fell to 4.67% from 4.74% on Tuesday.

Among banks, Wells Fargo rose $1.77 to $51.24 and Washington Mutual surged $1.65 to $53.38.

Many consumer-related issues also gained, including Home Depot, up $2.34 to $43.70; Philip Morris, up $1.21 to $50.04; and Darden Restaurants, up $1.77 to $23. Lower interest rates could help consumers keep spending.

Krispy Kreme rose 44 cents to $74.06. After the market closed, the doughnut chain said it will move its stock to the NYSE from Nasdaq on May 17.

The energy sector posted strong gains as oil and natural gas prices rebounded. Unocal rose $1.10 to $37.99, and Noble Affiliates jumped $2.67 to $50.05.

Bullish comments from Goldman Sachs' Cohen also encouraged investors. "We believe that attractive equity valuation has been restored and forecast year-end 2001 price levels of 1,650 and 13,000" for the Standard & Poor's 500 index and the Dow industrials, respectively, Cohen said in a note to clients.

That would be a 31% gain in the S&P and a 21% gain in the Dow from current levels.

Cohen suggested that clients boost stocks to 70% of their portfolio from 65% by reducing cash holdings from 5% of assets to zero. She left unchanged her 27% recommended portfolio weighting in bonds and 3% in commodities.

Market Roundup: C7-8

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