GDP climb underpins stocks

GDP climb underpins stocks

Techs pace advance; broad market also
gains traction

NEW YORK (CBS.MW) – A stronger-than-expected rise in first-quarter
gross domestic product provided a launching pad for the stock market
Friday as it indicated the U.S. economy isn’t exactly rolling over.

First-quarter GDP rose 2 percent in the first quarter, much more than
the 1 percent rise that had been expected. Fourth-quarter GDP stood at 1
percent. .

Dain Rauscher’s Robert Dickey notes that the advance-decline readings
are performing better than the market averages would indicate.

"This week has turned out to be an excellent follow-through to
last week’s sudden strength. Stocks are generally doing better than it
appears, as most of the focus is still on the big-cap tech names, which
are working their way higher in some pretty choppy patterns," he
commented.

Dickey added that a number of stocks are breaking out of longer-term
trading ranges, with bullish patterns common in the big oils and the
restaurants and others scattered among different industry groups.

The Dow Jones Industrial Average ($DJ) ascended 43 points, or 0.4
percent, to 10,734.

The Nasdaq Composite ($COMPQ) gained 24 points, or 1.2 percent, to
2,060 while the Nasdaq 100 Index ($NDX) swelled 31 points, or 1.8
percent, to 1,794.

The Standard & Poor’s 500 Index ($SPX) added 0.6 percent while
the Russell 2000 Index ($RUT) of small-capitalization stocks gained 0.6
percent.

Volume came in at 78.6 million on the NYSE and at 161 million on the
Nasdaq Stock Market. Market breadth was decidedly positive, with
advancers trouncing decliners by 15 to 7 on the NYSE and by 19 to 8 on
the Nasdaq.

Elsewhere, Trim Tabs estimated that all equity funds had inflows of
$100 million over the week ending April 25 vs. inflows of $2.2 billion
in the prior week. And equity funds that invest primarily in U.S. stocks
had inflows of $1.6 billion compared with inflows of $3.2 billion in the
prior week.

Inside the GDP numbers

A big part of the GDP gain was due to a 10.4 percent plunge in
imports — the largest quarterly decline in 10 years. The implications
of a decline in imports are twofold, however. In fact, weakening imports
strengthen the GDP numbers because they imply a smaller deficit – which
is subtracted from GDP. But softer imports are also an indication of
softer demand in the U.S.

The personal consumption expenditures price deflator – an inflation
gauge — swelled 3.3 percent after rising 1.9 percent in the fourth
quarter and compared to expectations for a 2.3 percent reading.

Specific movers

In the biotech arena, Amgen (AMGN) climbed 2.7 percent even after
informing investors that it won’t meet Wall Street’s profit targets for
the full year. The company said late Thursday that it made 25 cents a
share in its first quarter, a penny a share ahead of the First
Call/Thomson Financial estimate. But Amgen warned that it expects 2001
earnings to grow in the low-double digits, down from an earlier forecast
of profit growth in the mid-teens. The biotech concern also announced a
delay in marketing approval for some key products.

The entire biotech sector spurted, with Biogen up 1.3 percent and
Human Genome Sciences (HGSI) up 2.8 percent. The latter posted a
first-quarter loss of 10 cents a share, a penny narrower than the First
Call estimate.

In the fiber-optic space, Corning (GLW) shed 1.4 percent. The company
announced late Thursday a first-quarter profit of 29 cents a share, a
penny ahead of the lowered First Call target. But Corning trimmed its
full-year earnings expectations to between 90 and $1 a share vs. the
previous target of $1.20 to $1.30 a share. Further, the fiber-optic
outfit announced more layoffs. But Corning’s warning didn’t take down
the entire group. Ciena struggled, losing 4.7 percent, but Nortel
Networks rose 1.1 percent, JDS Uniphase 3 percent and Sycamore Networks
5.1 percent.

Treasury focus

Treasury lost significant ground following the release of the sturdy
GDP data.

The 10-year Treasury note was down 11/32 to yield ($TNX) 5.24 percent
while the 30-year government bond shed 1/4 to yield ($TYX) 5.725
percent.

Still ahead is the final revision to the April Michigan consumer
sentiment indicator. View Economic Preview and economic calendar and
forecasts.

In the currency arena, dollar/yen put on 0.8 percent to 124.14 while
euro/dollar slid 0.9 percent to 0.8948.