Stocks Rally on Growing Optimism Over Economy

Jun 29 2001

Stocks headed higher in early morning trading on Friday, led by technology shares, as investors wrapped up the last trading day of the second quarter of the year amid mounting hopes that an economic turnaround is on the horizon.

"We are gradually, slowly building investor confidence that the profit recession will end," said Hugh Johnson, chief investment officer at First Albany Corp. "What's leading to the bullishness is not anything you are currently looking at. Earnings are dismal, but investors are becoming more optimistic that the profits recession will end."

Indeed, the economic downturn is still whacking corporate profits, but investors are chasing stocks higher.

Communications chip maker PMC-Sierra Inc. jumped $1.61, or more than 5 percent, to $30.76, despite warning of a wider than expected loss due to weak demand.

The technology-laced Nasdaq Composite Index rose 32.53 points, or 1.53 percent, to 2,157.99. The blue-chip Dow Jones industrial average gained 23.82 points, or 0.23 percent, at 10,590.03. The broader Standard & Poor's 500 Index was up 6.62 points, or 0.54 percent, at 1,232.82.

Microsoft Corp. rose 37 cents to $73.14, boosting both the Nasdaq and the Dow. The stock rallied on Thursday after a U.S. appeals court overturned an order to split the software giant in two, but left intact another ruling that it broke antitrust laws. Microsoft founder Bill Gates said he was "very open" to reaching a settlement in the case.

The market also welcomed a rise in the the Chicagoland Business Barometer in June to a seasonally adjusted 44.4, the highest level this year. "This rise could indicate the worst is over," the National Association of Purchasing Management-Chicago said.

"It's pretty encouraging," Johnson said. "It's a real surprise, The worst part of the economy has been manufacturing, so this is pretty good news."

Cisco Systems Inc., the world's largest maker of gear that powers the Internet, rose 68 cents to $19.26. Business software maker Oracle Corp. gained 68 cents at $19.86. Intel Corp., the world's largest maker of computer chips, climbed 84 cents to $30.48.

Honeywell International Inc. fell $1.45 to $36.75, and a fellow Dow component General Electric Co. gained 48 cents to $49.35. Honeywell offered to reduce the purchase price it sought from GE, in a bid to compensate its suitor for the demands of European antitrust regulators and help close the deal.

Agere Systems Inc. gained 75 cents at $6.74. The company, a Lucent Technologies Inc. spin-off, is cutting about 25 percent of its work force and expects to take up to $900 million in charges as it restructures to cope with the severe downturn in the semiconductor industry. Lucent rose 38 cents to $6.14.

Wall Street rallied on Thursday following Microsoft's court victory and the Federal Reserve's sixth interest-rate cut of the year.