|Blue-chip stocks rise, tech stocks fallnews
|20 December 2001
Blue-chip stocks have risen this week, with the Dow closing
above the key 10,000-level, but technology stocks sagged on news
of profit woes from Motorola and Micron Technology, reports say.
Mobile phone giant Motorola warned of weaker sales and announced
job cuts, while No 2 memory chipmaker Micron Technology issued a
grim earnings report. Both showed tech companies still face an
uphill battle to turn around business, and undermined the Nasdaq
Investors overcame their trepidation and extended a buying streak
that started this week. They took comfort in a key gauge the
Conference Boards US index of leading economic indicators
that rose for a second straight month in November, pointing to an
economic recovery in the first half of 2002.
"The leading indicators are saying the economy is going to
recover and if they do reach an agreement on a stimulus package,
all the better," says Hugh Johnson, chief investment officer
at First Albany Corp. "It makes the case for a recovery
which is already strong better."
US President George W Bush says he had worked out a plan with US
lawmakers on an economic stimulus package. Senate Democratic
leader Tom Daschle of South Dakota says differences remained, but
the market is betting a deal will be struck, analysts say.
The Dow Jones industrial average gained 72.10 points, or 0.72 per
cent, to 10,070.49, its first close above the
psychologically-important level since 7 December. The broader
Standard and Poors 500 Index rose 6.64 points, or 0.58 per
cent, to 1,149.56. The technology-laced Nasdaq Composite Index
slipped 21.87 points, or 1.09 per cent, to 1,982.89.
"Its this balance between worrying about corporate profits
and, Lets look forward to an economic rebound," says
John Forelli, portfolio manager at Independence Investment LLC.
"Investors are fearful of selling stocks in the thought that
in two weeks, theyll be wanting to buy them back."
Blue-chip stocks were supported by news that Citigroup, the No 1
US financial services firm, plans to sell up to 20 per cent of its
Travelers Property Casualty unit to the public and spin off the
rest to its stockholders by the end of 2002, in a move to ditch
the slow-growing and volatile business. Citigroup gained $1.90 to
$50. Weakness in technology shares was reflected in semiconductor
issues, which retreated broadly under heavy volume. The
Philadelphia Semiconductor Index tumbled by 5.20 per cent, to
Micron finished the session down $1.61 at $30.20. It reported a
bigger-than-expected loss and said sales fell 73 per cent as it
continued to be hurt by plunging prices and a glut in capacity.
Motorola, the worlds No 2 mobile phone-maker, became the latest
telecom equipment firm to admit it has been hit by weak demand
after it said it will cut another 9,400 jobs and that it sees
lower revenues in 2002. Motorola fell 85 cents to $15.76.
An earnings warning from the worlds top aluminum producer,
Alcoa Inc, weighed on the Dow early in the session after it warned
earnings were likely to miss Wall Streets estimates due to
unpaid bills and charges to restructure operations. Alcoa fell
$2.28 to $35.38. The stock market has rallied since late
September, but corporate earnings may suffer their worst drop of
the year in the fourth quarter.
Companies in the S&P 500 posted a 21.6 per cent tumble in
profits for the third quarter, marking the biggest drop in
earnings since the last recession of 1991, according to Thomson
Financial/First Call. Analysts are forecasting a 20.1-per cent
decline in earnings in the fourth quarter, but the research firm
believes that the number could widen to 22 per cent.
Solectron Corp, the worlds largest contract electronics
manufacturer, saw its shares fall sharply for the second session
down $1.29 at $10.81. On 19 December, the company reported a
quarterly loss of $52.5 million, and said it saw sharp declines in
its personal computer and telecommunications operations.
Calpine Corp was one of the most actively traded issues on the New
York Stock Exchange. It rose 69 cents to $14.69, after it said it
plans to sell $400 million of convertible debentures amid investor
fears that independent power producers will be unable to access
funding for their power plants.
Williams Cos, an energy trader and pipeline operator, rose after
it said it would cut 2002 capital spending by 25 per cent in a
move to strengthen its balance-sheet. It said it may cut earnings
growth targets because of the slowing economy and other factors.
It rose $2.60 to $24.70.
The stock of Dynegy Inc rose $3.08 to $23.98, after a federal
judge handed the company an early victory in its fight to take a
lucrative pipeline from its former merger partner, bankrupt Enron
Corp, by allowing the lawsuit to
heard in a state court.
One other bright spot was network equipment-maker 3Com Corp, which
posted a narrower-than-expected quarterly loss on 18 December and
said it hopes to return to profitability by the fourth quarter.
3Coms shares gained 78 cents to $6.09. Oil stocks were helped
by news from the US governments Energy Information
Administration, which released figures showing a 1.1-per cent drop
in fuel inventories.