Dow, Nasdaq build on gains

Dow, Nasdaq build on gains

Rally extremely broad-based

NEW YORK (CBS.MW) – Both the Dow Industrials and Nasdaq continued to
build on gains Thursday, with most sectors participating in the upside.

UBS Warburg’s Edward Kerschner said he continues to look for stronger
growth in the second half of the year and in 2002, driven by easier
comparisons — which begin the in fourth quarter – an end to the
inventory correction by mid-2001 and aggressive Fed easing so far this
year.

Kerschner said technology is by far the weakest sector while energy
is by far the strongest. "Many cyclical sectors should be down less
in the second quarter than in the first, which bodes well for earnings
growth in the second half of the year."

"With second quarter earnings expected to be weak, the
temptation is to avoid buying stocks until an upturn in economic
activity and profits is definitely under way. But history suggests this
would be a mistake. In the last three recessions, the stock market
bottomed four to five months before industrial production turned up and
six to 14 months before positive earnings growth resumed,"
Kerschner commented in a note to clients.

The Dow Jones Industrial Average ($DJ) rose 56 points, or 0.5
percent, to 10,682.

Standard and Poor’s Investment Policy Committee notes that the
market’s increased volatility reflects the tug of war between bulls –
who point to lower interest rates as a reason to be optimistic – and the
bears – who fret over lower earnings and a weakening economy.

" In addition, institutions are focusing on making money in a
bear market and are not willing to establish longer-term
positions," S&P said in a research note.

The Nasdaq Composite ($COMPQ) added 32 points, or 1.6 percent, to
2,092 while the Nasdaq 100 Index ($NDX) rose 25 points, or 1.4 percent,
to 1,839.

The Standard & Poor’s 500 Index ($SPX) added 0.9 percent while
the Russell 2000 Index ($RUT) of small-capitalization stocks climbed 1.1
percent.

Volume came in at 230 million on the NYSE and at 438 million on the
Nasdaq Stock Market. Market breadth was decidedly positive, with
advancers outnumbering decliners by 17 to 8 on the NYSE and by 18 to 11
on the Nasdaq.

Treasury focus

Government bond issues traded mixed, with most of the buying interest
concentrated in the long end of the yield curve while short issues
fumbled.

The 30-year was benefiting from an expected Treasury buyback
Thursday.

The 10-year Treasury note was off 1/32 to yield ($TNX) 5.27 percent
while the 30-year government bond added 3/32 to yield ($TYX) 5.775
percent.

In economic news, the first-quarter employment cost index – the
broadest measure of wage costs – rose 1.1 percent vs. expectations for a
1 percent increase.

In addition, weekly jobless claims rose 18,000 to 408,000. and view
Economic Preview and economic calendar and forecasts.

In the currency space, dollar/yen increased 0.2 percent to 122.40
while euro/dollar edged down 0.1 percent to 0.8965.

The European Central Bank left short-term rates unchanged at its
policy-setting meeting Thursday amid concern that inflation remains
above its target. The ECB is the only major central bank not to reduce
lending rates this year.