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Stocks Bounce on Earnings Reports, Bargain Hunting

Firms in sectors such as drugs, defense lift Dow and broader market. But prospect of war weighs on investors.

January 29, 2003|From Times Staff and Wire Reports

Stocks rebounded modestly Tuesday as some bargain hunters moved in after the recent plunge in share prices. Upbeat corporate earnings reports helped the mood on Wall Street.

But many investors remained sidelined, awaiting President Bush's State of the Union speech Tuesday evening and more clues about the administration's plans for war with Iraq.

The Dow Jones industrials gained 99.28 points, or 1.2%, to 8,088.84. The index had tumbled 9.6% since Jan. 14, a streak that saw losses in seven of the eight sessions through Monday.

Broader indexes also rose. The Standard & Poor's 500 climbed 11.06 points, or 1.3%, to 858.54. The Nasdaq composite added 16.91 points, or 1.3%, to 1,342.18.

Winners topped losers by about 21 to 12 on the New York Stock Exchange and Nasdaq in moderate trading.

Analysts said the market was overdue for a bounce after the slump of the last two weeks. Stocks have been pummeled as war rhetoric between Washington and Baghdad has escalated, raising fears about the effect of a conflict on the economy.

Share prices rallied early Tuesday after the Conference Board's report on consumer confidence came in slightly above expectations. The board said the index fell to a nine-year low of 79 this month, but many analysts had anticipated worse.

A government report on durable goods orders for December was less encouraging and appeared to confirm that many companies continue to rein in their spending.

But several major firms reporting quarterly earnings gave upbeat assessments of 2003.

Drug giant Merck, for example, surged $2.64 to $54.40 after saying it expects double-digit earnings growth this year in its main pharmaceutical unit.

Consumer products firm Procter & Gamble gained $1.95 to $85 after projecting that 2003 earnings growth may reach 13%.

But the prospect of war with Iraq is still "damping everything," Tom Schrader, head of listed trading at Legg Mason Wood Walker in Baltimore, told Bloomberg News.

In other trading Tuesday, Treasury bond yields ended little changed, while gold was fractionally higher. In currency trading, the euro slipped against the dollar for the first time in 10 sessions, ending at $1.082.

Among Tuesday's highlights:

Drug stocks were bolstered by Merck's report and by a strong earnings outlook from Wyeth, which soared $3.70 to $37.70. Other winners included Johnson & Johnson, up 86 cents to $53.04, and Eli Lilly, up 72 cents to $60.94.

Consumer products stocks rallying with Procter & Gamble included Clorox, up 87 cents to $38.90, and Colgate-Palmolive, up 67 cents to $51.52.

Elsewhere in the consumer sector, Coca-Cola failed to rally with the rest of the market and instead dropped to a multiyear low. It fell 69 cents to $41.10, its lowest price since 1996. Coke is scheduled to report fourth-quarter earnings Feb. 12.

Defense stocks rebounded as Northrop Grumman reported better-than-expected earnings. Northrop surged $3.47 to $91.86, General Dynamics gained $1.54 to $66.89 and Alliant Techsystems jumped $3.50 to $55.14. Despite the war threat, all three stocks have fallen more year to date than the Dow, which is down 3%.

Xerox climbed $1.40 to $9.45 after posting quarterly earnings well above expectations.

Many other technology hardware shares advanced, including Dell Computer, up 81 cents to $24.81; IBM, up $1.69 to $80.11; and Hewlett-Packard, up 41 cents to $18.78.

Energy stocks were mostly higher. Exxon Mobil gained 84 cents to $32.66 and ChevronTexaco rose $1.10 to $62.95.

R.J. Reynolds Tobacco Holdings dropped $2.12 to $40.90. The company said it had a loss of $59 million last quarter as sales declined 5%.

Major European markets closed fractionally higher after plunging Monday. The German market gained 1% and the British market edged up 0.3%.

Market Roundup, C8-9

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