US stocks rallied, lifting the Standard & Poor's 500 Index to its first gain in three days, as Coca-Cola Co, AOL Time Warner Inc and Microsoft Corp gained on Friday.
Third-quarter earnings reports this week weren't as bad as investors had expected, some money managers said. That helped offset concern that the spread of anthrax will hurt consumer confidence, slowing the economy, they said.
"Investors are slowly realizing that the earnings news so far this quarter has turned out to be of higher quality than feared," said Brian Slater, who helps manage US$500 million at Condor Capital Management in Martinsville, New Jersey. "I think people are finally seeing that and letting this anthrax scare go by the wayside and picking up stocks that look cheap."
The S&P 500 rose 4.87, or 0.5 percent, to 1,073.48, erasing a 1.1 percent loss. The NASDAQ Composite Index gained 18.59, or 1.1 percent, to 1,671.31. The Dow Jones Industrial Average rose 40.89, or 0.5 percent, to 9,204.11.
Still, all three indexes posted their first weekly drops since the week of Sept. 17, when trading resumed after the terrorist attacks that destroyed the World Trade Center. The S&P 500 fell 1.7 percent, the Dow 1.5 percent and the NASDAQ 1.9 percent.
"People are trying to figure out how deep and far this anthrax scare goes," said Peter Coolidge, a trader at Brean Murray & Co. "I think that's put everything on hold."
Almost 1.3 billion shares changed hands on the New York Stock Exchange, about average for a day in the past three months. Six stocks rose for every five that fell on the Big Board.
Coca-Cola rose US$2.47 to US$48.59 after UBS Warburg analyst Caroline Levy said that the company's management team "is becoming increasingly cohesive and effective."
In a note to clients, she said it now appears more likely the biggest soft drink maker will meet her goal of 11 percent to 12 percent annual profit growth. Levy raised her rating on the stock to "strong buy" from "hold." Coke has gained 10 percent in the last two days. The company's third-quarter profit yesterday exceeded expectations, and it met analyst forecasts for sales.
AOL Time Warner rose US$1.27 to US$31.17, paring its 11 percent loss of the past two days. The stock had slid after the company reported a wider third-quarter loss.
Microsoft contributed the most to the rise in the S&P 500, gaining US$1.15 to US$57.90. The largest software maker said sales rose 6.2 percent last quarter, boosted by higher demand for corporate-network software. Investment losses pulled down fiscal first-quarter net income.
Gillette Co rose US$1.58 to US$31.30. The largest maker of razors, said sales unexpectedly rose in the third quarter.
Analysts had expected sales to decline 4 percent in the period.
Scientific-Atlanta Inc surged US$3.80, or 22 percent, to US$21 for the biggest percentage gain in the S&P 500. Profit at the maker of cable-television set-top boxes was higher than expected and the company said it will trim costs by firing 750 workers.
SPX Corp rose US$5.28 to US$98.65. The manufacturer of brakes, hydraulic gear and fiber-optic equipment said it expects to meet analysts' estimates this year and next.
Disappointing earnings from companies such as Providian Financial Corp, Texas Instruments Inc, EMC Corp and PMC-Sierra Inc contributed to losses for the week.
Providian plunged US$7.25, or 58 percent, to US$5.15 on Fridayy after the fifth-largest US Visa and MasterCard issuer said credit card losses are mounting and its chief executive officer will resign.
Providian lost 34 percent last week when it said third-quarter earnings would be 75 percent below forecasts.
"Companies are still reluctant to give the thumbs-up sign for 2002," said David Sowerby, who helps manage US$65 billion at Loomis, Sayles & Co in Bloomfield Hills, Michigan.
This was one of the busiest weeks for third-quarter earnings, with more than 1,200 US companies reporting. Earnings for S&P 500 companies are expected to drop 14.8 percent this year, according to Thomson Financial/First Call, compared with the 10.1 percent decline forecast by analysts before the terrorist attacks.
PMC-Sierra fell US$1.48 to US$15.12. The maker of semiconductors for the telecommunications industry said its third-quarter loss was little changed and forecast lower sales for this quarter.
Enron Corp fell US$2.95 to US$26.05. The shares have fallen as much as 28 percent in the past three days on concern the biggest energy trader's dealings with partnerships run by its chief financial officer contributed to investment losses.
This week's losses came as seven people were diagnosed with anthrax from letters mailed to news organizations or government offices. A New York Post employee on Friday became the latest person infected. The spread of anthrax has closed the US House of Representatives and slowed mail delivery.
EBay Inc shed US$7.11 to US$51.95 even as the No. 1 Internet auctioneer said third-quarter profit surged 24 percent as it attracted shoppers seeking bargains on clothing, housewares and garden items in a slowing economy.
US Bancorp Piper Jaffray analyst Safa Rashtchy cut his investment rating on EBay to "neutral" from "buy." He said the assumption the company is immune to the weakening economy is invalid because since Sept. 11, buyers have been slower to return to the site than sellers.
Stocks have recouped most of the losses from the first of week trading after the terror attacks, in part because investors expect lower interest rates, higher government spending and tax cuts to spark a recovery in the economy next year.
The Federal Reserve will cut rates for a 10th time this year if the economy continues to flounder, said William Poole, president of the St. Louis Fed, in remarks yesterday to the University of California-Davis Institute of Governmental Affairs.
Economists expect third-quarter US gross domestic product to fall 0.7 percent, down from a 0.3 percent rise in the second-quarter.
The S&P 500 is down 1.7 percent since Sept. 11, while the Dow has lost 4.2 percent and the Nasdaq is 1.4 percent lower.
Sowerby of Loomis Sayles said the S&P 500 may fall another 5 percent as investors digest corporate profit reports. The index will then rally 20 percent or more by the middle of next year as lower rates, lower energy prices and government spending boost earnings, he said.
He has bought shares of Carnival Corp, the largest cruise line company, as the price has fallen. He also bought shares of earthmoving equipment maker Caterpillar Inc.
Corning Inc lost US$0.12 to US$7.90. The biggest maker of optical fiber for telecommunications networks said it will miss fourth-quarter earnings estimates because of weaker demand.
Third-quarter earnings, excluding certain costs, beat the average forecast from analysts surveyed by First Call PeopleSoft Inc added US$2.26 to US$26.56. The maker of human-resources and accounting software said third-quarter sales rose 15 percent, buoyed by new products. Profit fell because of an investment gain a year earlier.
Sycamore Networks Inc fell US$0.80 to US$4.04. The fiber-optic equipment manufacturer said it's cutting 240 jobs and reducing its fiscal first-quarter revenue expectations because of a spending drop in the telecommunications market.
Emulex Corp jumped US$4.60, or 23 percent, to US$24.65. The maker of data-storage networking equipment may see an increase in orders from Compaq Computer Corp and EMC, Dain Rauscher Wessels analyst Robert Montague said in a research note.
The Russell 2000 rose 4.64, or 1.1 percent, to 425.70. The Wilshire 5000 Total Market Index gained 53.25, or 0.5 percent, to 9,894.90.
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