Cisco results spark rally sending Dow up triple-digits

Posted 2:25PM on Wednesday 8th May 2002 ( 23 years ago )

NEW YORK - Unexpectedly strong results from Cisco Systems set off a spectacular rally across the stock market Wednesday as investors, desperate for good news after weeks of selling on lackluster earnings, finally got a reason to hunt for bargains. The Dow Jones industrials soared more than 275 points but the biggest gains came in the technology-focused Nasdaq composite index, which shot up 6 percent. Analysts cautioned against reading too much into the gains, however, noting that the advance reflected a snapback from recent selling, rather than any improvement in investor sentiment. By early afternoon, the Dow was up 275.60, or almost 3.0 percent, at 10,112.15, on track for its biggest point gain since Sept. 24, when the average gained 368.05. Broader stock indicators fared even better. The Nasdaq rose 94.14 to 1,667.96, poised for its biggest point gain since July 12, 2001, when the index advanced 103.70. The Standard & Poor's 500 index was up 33.49, or 3.2 percent, at 1,082.98. "Stocks were extremely oversold, especially tech stocks and pessimism was rampant. So the market was primed for a rally and Cisco's news was clearly the impetus," said Stephen Massocca, president of Pacific Growth Equities. "But as far as a change in sentiment, I don't think that's happened. I think investors are still extremely pessimistic about corporate profits." Cisco soared $2.64, or 20 percent, to $15.72 after reporting higher-than-expected third-quarter profits late Tuesday. The networking giant said it expected little growth in the coming quarter, but that didn't curb Wall Street's buying. Cisco rival Juniper Networks climbed 89 cents to $9.32, while software company Microsoft jumped $3.83 to $53.30, helped by a surge in European sales of its Xbox video game systems. Financial stocks were also strong on reports that Merrill Lynch and the New York attorney general were working on a settlement in the investigation of alleged conflicts of interest at the nation's largest brokerage firm. Merrill rose $2.88 to $43.52, while Lehman Brothers advanced $4.47 to $64.87. There was some selectiveness, however. Dynegy tumbled $2.40 to $9.86 after the energy trader indicated the Securities and Exchange Commission's investigation into one of its contracts is intensifying. The trading was among the best the market has seen in weeks, but it was hard to know whether they represented the beginning of any longer-term improvement or merely bargain hunting. Stocks have been moving lower for weeks now on mediocre earnings reports from companies that have said it's too soon to predict a business turnaround. Wall Street has fallen into a pattern of mounting sharp, but ultimately unsustainable, rallies. Analysts say investors, fed up with the market's volatility, are using the advances to collect profits rather than invest on expectations higher market levels are ahead. As a result, the major stock indexes have been trading at levels not seen in months. The Nasdaq and S&P 500 have been trading at levels last seen in October, while the Dow has struggled to stay above 10,000. Advancing issues led decliners 3 to 2 on the New York Stock Exchange. Volume came to 860.50 million shares, ahead of the 751.72 million at the same point Tuesday. The Russell 2000 index climbed 5.97 to 504.95. Overseas, Japan's Nikkei stock average rose 1.8 percent. In Europe, Germany's DAX index rose 2.3 percent, Britain's FTSE 100 was up 1.5 percent, and France's CAC-40 gained 2.2 percent. ------ On the Net: New York Stock Exchange: http://www.nyse.com Nasdaq Stock Market: http://www.nasdaq.com

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