Stocks snap losing streak
But Philip Morris warning, worries over purported bin Laden tape limit gains.
November 12, 2002: 6:01 PM EST
By Parija Bhatnagar, CNN/Money Staff Writer
NEW YORK (CNN/Money) - Stocks snapped a three-session losing streak Tuesday but ended well off their best levels of the day after a profit warning from Philip Morris and news of a new Osama bin Laden tape eroded much of the market's gains.
The Dow Jones industrial average (up 27.05 to 8386.00, Charts) managed a small gain after a late-day pullback in the last half-hour of trading. The blue-chip index was up about 150 points at its session high. The Nasdaq composite (up 30.37 to 1349.56, Charts) ended up 2.3 percent while the Standard & Poor's 500 index (up 6.76 to 882.95, Charts) rose 0.8 percent.
Tech stocks drew strength after bullish forecasts from Oracle and Cisco Systems. But Philip Morris (MO: down $5.95 to $37.03, Research, Estimates) hurt blue chips after it warned about its 2003 results, saying it could not confirm its previous guidance. Its stock tumbled nearly 14 percent on the news.
The market also appeared to sell off in reaction to news reports that an audio recording purportedly made by Osama bin Laden threatened attacks on targets in the West.
Market breadth was positive. On the New York Stock Exchange, advancers beat decliners by nearly 2 to 1 as 1.3 billion shares traded. On the Nasdaq, advancers beat decliners 5 to 3 as 1.5 billion shares changed hands.
"I think the market got a little over-extended today on a tech rally. Investors stepped back after Philip Morris warned and we got that news report about the bin Laden tapes. With the rumors floating around, the thinking in the last hour was why stay around and be caught holding the bag," said Bryan Piskorowski, market analyst with Prudential Financial.
Stocks may get a tentative start Wednesday depending on which way the wind blows for Wal-Mart's (WMT: up $0.85 to $53.85, Research, Estimates) quarterly results. Also on tap: IBM (IBM: up $1.86 to $79.15, Research, Estimates)'s analysts' meeting, scheduled to start Wednesday afternoon.
Meanwhile, investors are expected to listen closely to comments from Federal Reserve Chairman Alan Greenspan in his testimony on the economy before the Joint Economic Committee of Congress. As a precursor, Fed Vice Chairman Roger Ferguson said Tuesday that the central bank could still cut interest rates. He also said last week's half-point cut limits the deflation risk and may boost business investment.
The Fed, the nation's central bank, surprised the market with a bigger-than-expected half-point rate cut last week, causing a mixed reaction on Wall Street. Stocks sold off for three straight sessions after the rate cut last Wednesday.
Iraq's an open question
Analysts said fears of a war with Iraq remained a worry for investors.
Iraq's parliament Tuesday unanimously rejected the most recent U.N. Security Council resolution requiring it to disarm and allow weapons inspectors back into the country. Despite the "no" vote, the final decision rests with Iraqi President Saddam Hussein, and Iraq has a Friday deadline to either accept or reject the terms of the resolution.
Saddam's rejection of the resolution could trigger a U.S.-led military engagement in the region. The Bush administration said it was prepared to act unilaterally should Iraq violate the resolution passed last week.
"Iraq will be the overriding factor going forward until that situation is resolved," Robert Hoehn, director of research with Fulcrum Global Partners, told CNNmoney Morning.
"The economy is growing, albeit tepidly, and we've had a major correction in the stock market," Hoehn added. "So valuations have come down dramatically and that's a positive. I also don't expect the interest rate cut from last week to have a major impact. What we really need to see is traction on the capital expenditure front."
Software and wireless stocks connect for gains
A positive outlook from software maker Oracle (ORCL: up $0.45 to $9.50, Research, Estimates) ignited enthusiasm for technology stocks after a bruising session for the sector Monday. Contrary to the general industry forecast, chief financial officer Jeff Henley late Monday forecast a turnaround in technology spending and reiterated the company's second-quarter earnings target. Henley also said growth in 2003 would end Oracle's two-year revenue decline.
Cisco Systems (CSCO: up $0.71 to $12.87, Research, Estimates) CEO John Chambers said the order backlog for products to be shipped within 90 days -- a key gauge used by analysts to assess the health of a company's business and the sector -- was up from its September level. Cisco shares were the most active on the Nasdaq.
Telecom stocks were cheered by Vodafone's (VOD: up $2.19 to $17.64, Research, Estimates) quarterly results. Europe's largest mobile phone operator said its first-half loss narrowed and also delivered a bullish outlook for the rest of the year.
The strong performance from technology stocks Tuesday got some cautious Wall Street watchers sounding somewhat bullish.
"With Cisco saying that its order backlog is growing [there are] good tentative first signs that the future is getting better," Jim Glickenhaus, market strategist with Glickenhaus & Co., told CNNfn's The Money Gang. "But it will still be a slow dribble."
3M (MMM: up $1.45 to $127.81, Research, Estimates) led the Dow winners. The diversified manufacturer said it agreed to buy Corning (GLW: up $0.43 to $2.59, Research, Estimates)'s Precision Lens division -- the largest maker of lens systems for television units -- for $850 million.
In overseas markets, European bourses rose on Vodafone's news, while Asian-Pacific stocks finished mixed Tuesday, with Tokyo's Nikkei index just managing to finish higher.
Treasury prices were mixed, with the 10-year note yield at 3.83 percent. The dollar weakened against the euro and the yen. The euro held above parity with the greenback.
Light crude oil futures slipped 4 cents to $25.90 a barrel in U.S. trading, where gold rose further above the $320-an-ounce mark.
