- NEW YORK (Reuters) - Stocks
racked up hefty gains on Tuesday as investors swept into the market after
days of sharp declines, hoping the Federal Reserve may fire off another
interest rate cut to shore up the economy.
-
- "We are getting some talk of further rate cuts by
the Fed, and that is certainly helping the market," said Owen Fitzpatrick,
head of the U.S. equity group at Deutsche Bank Private Banking, which oversees
$7 billion. "People are hoping additional rate cuts are going to help
the economy and save us from going into another recession."
-
- Lehman Brothers became the latest Wall Street investment
bank to say it expected the Fed to cut rates -- currently at 40-year lows
-- before the end of the year. Bargain hunters also helped spur stocks
as they scooped up technology names following four sessions of declines.
The Nasdaq composite index .IXIC closed at 5-year lows on Monday.
-
- Interest rate cuts "make money cheaper to borrow
and stimulate economic growth," said David Memmott, head of listed
block trading for Morgan Stanley. He added that recent declines were another
catalyst. "We've seen the Dow drop 2 percent or more for three days,"
he said. "We're due for a bounce."
-
- Stock indexes racked up their biggest percentage gains
since a monster rally last week pushed the blue-chip Dow Jones industrial
average .DJI to its third-largest point gain ever.
-
- The Dow Jones industrial average .DJI was up 230.46 points,
or 2.87 percent, at 8,274.09, according to the latest available figures.
The broader Standard & Poor's 500 Index .SPX was up 24.97 points, or
2.99 percent, at 859.57. The Dow and the S&P had dropped for the past
three sessions.
-
- The tech-loaded Nasdaq Composite Index .IXIC was up 53.54
points, or 4.44 percent, at 1,259.55. On Monday, the index racked up its
lowest close since April 1997.
-
- Only three stocks in the 30-member Dow average were lower,
and all but eight of the 99 S&P 500 industry groups gained.
-
- Winners outpaced losers by a ratio of about 3 to 1 on
the New York Stock Exchange and 12 to 5 on Nasdaq. More than 1.5 billion
shares changed hands on both the Big Board and Nasdaq.
-
- Some market watchers were skeptical of the surge, however,
recalling a string of fleeting rallies throughout the bear market. Stocks
rallied at the end of July, spurring hopes the market had scraped bottom.
But that run-up was followed by a string of steep selloffs.
-
- "I guess everybody is afraid of missing out on a
rally," said Ted Oberhaus, manager of equity trading at Lord Abbett
& Co., which oversees $43 billion. "But keep in mind this is a
bear-market rally. This is not something you want to chase."
-
- Stock and bond traders also pinned Tuesday's stock gains
on an asset reallocation deal overnight that was said to involve a fund
manager selling a large parcel of European bond futures and using the proceeds
to invest in German shares.
-
- "There's talk about new money coming in (to stocks)
-- flowing out of bonds into equities," said Keith Janecek, vice president
of institutional sales and trading at Legg Mason Wood Walker. "They're
saying there's $5 billion out there rolling into equities."
-
- Web gear giant Cisco Systems Inc. CSCO.O climbed 71 cents,
or more than 6 percent, to $12.07 and was the most-active stock on Nasdaq
during the daily session as investors awaited quarterly results from the
technology bellwether. After the closing bell, Cisco posted higher earnings
due to cost cuts, and said it more than doubled its stock buyback program.
-
- AOL Time Warner Inc. AOL.N dipped 5 cents to $9.90. The
media conglomerate said it hired Jon Miller, a former top executive from
USA Interactive, to lead the company's struggling America Online division.
-
- Omnicom Group Inc OMC.N rallied $6.09, or almost 13 percent,
to $53.30. The world's No. 3 ad group said its second-quarter profit rose
9 percent on higher-than-expected revenue, boosted by improvements in the
beleaguered U.S. advertising sector.
-
- Technology stocks helped lead the upward trend. Intel
Corp. INTC.O , the world's largest maker of computer chips, was the biggest
percentage gainer in the Dow average, tacking on $1.25, or 7.9 percent,
to $17.13. Software giant Microsoft Corp. MSFT.O climbed $1.68 to $45.67.
-
- A growing number of investment banks are forecasting
a rate cut in coming months after a string of disappointing economic data,
including figures showing tepid economic expansion, weakening growth in
manufacturing and the service sector, souring consumer confidence and scanty
job gains.
-
- The Fed may change its risk statement at its policy meeting
next week to declare a greater threat of renewed economic weakness, and
it may cut rates by a quarter-percentage point in September, November and
December, Lehman's economists said.
-
- The Fed is scheduled to meet on Tuesday, Aug. 13. It
has made no cuts since a string of 11 last year brought interest rates
to their current low levels.
-
- But some investors remained doubtful the market's gains
will hold, despite the positive breadth and hopes that rate cuts would
shore up the economy.
-
- "We remain skeptical since all of the past Fed rate
cuts have failed to inspire any sustainable rallies," wrote Louis
Navellier, who manages $6 billion for Navellier & Associates, in a
note to clients. "There just isn't any significantly positive fundamental
news. There's no blowout earnings news and there's no meaningful economic
news."
-
- Surging U.S. stocks also accelerated a dollar rally that
catapulted the currency to gains of more than 1 percent against the euro,
yen, sterling and Swiss franc.
|
