Microsoft leads “Bush” stocks higher

Stocks surge as ruling sets Gore back

Microsoft leads gains in so-called “Bush” stocks

NEW YORK (CBS.MW) – Shares of Microsoft surged Monday evening, boosting tech stocks and helping the market extend a daytime rally after two election rulings greatly boosted Texas Governor George W. Bush’s chances of winning the White House.

Microsoft (MSFT) shares were the most active in after-hours trading, surging more than 4 percent to almost $59 on the Island ECN after closing lower in normal trading. Shares of Philip Morris (MO) and Pfizer, other stocks expected to benefit under a Bush administration, were also slightly higher.

Futures for the Dow Jones Industrial Average and the Standard & Poors’ 500 index were also higher after hours, indicating a positive opening for stocks Tuesday morning.

The gains came after a state judge rejected Vice President Al Gore’s contest of the Florida election results, dealing a major blow to Gore’s presidential hopes. Gore was also snubbed by the U.S. Supreme Court, which earlier in the day set aside a decision by the Florida Supreme Court to allow a manual recount of some ballots and asked it to reconsider the ruling.

The Florida Supreme Court is now Gore’s last hope of getting a recount.

“Markets don’t like uncertainty, and if you can remove any uncertainty, it provides a bit more confidence,” said Gerald Cooper-Key, a portfolio manager at Calgary-based Mawer Investment Management, overseeing the firm’s international assets.

“While this removes one degree of uncertainty, it won’t have a lasting effect on the market,” he said.

To be sure, shares of 3Com (COMS) and Xilinx (XLNX) both fell after hours on profit warnings from the companies.

In regular trading, the blue-chip Dow Jones Industrial Average ($INDU) rose 1.8 percent or 187.41 points to 10,560.95, while the broad S&P 500 index ($SPX) rose 9.78 points or 0.7 percent to 1,325.01.

The tech-laden Nasdaq ($COMPQ) sank 29.31 points or 1.1 percent at 2,615.98, after earlier losses of more than 2 percent. Major tech shares like Cisco, Intel and Sun Microsystems bounced off their lows of the day, providing the leadership that got the Nasdaq briefly into the green.

But the big-cap tech names lost momentum in the last hour of trading. The Wilshire total market index was up 0.4 percent.

Advancers narrowly outnumbered decliners on the New York Stock Exchange, while decliners led advancers by 12 to 7 on the Nasdaq. About 1.07 billion shares traded on the NYSE while volume on the Nasdaq was 1.8 billion. See the top dollar-volume leaders in the market.

On the upside: Chemicals ($CEX), up about 6 percent. Retailers ($RLX) gained about 4 percent, led by Wal-Mart (WMT) and Home Depot (HD). Paper stocks ($FPP) rose 3.5 percent. Drug stocks ($DRG) gained 1.8o percent.

Big gainers on the Dow included Dupont (DD), Alcoa (AA), Caterpillar (CAT), International Paper (IP) and 3M (MMM), which gained on published reports that W. James McNerney Jr. would be named CEO.

The losers: Financials ($BKX) were soft, falling 1.4 percent. Biotech shares ($BTK) fell 4.2 percent.

“We seem to be in a quagmire,” said Art Hogan, chief market strategist at Jefferies & Co. “It’s bifurcating again” with the tech stocks on one side and “those boring old-economy stocks” on the other.

Junk status knocks Xerox

Xerox (XRX) was the most active stock on the Big Board, tumbling another 20 percent to $5 after Moody’s cut the copier maker’s credit rating to junk bond status.

United Therapeutics (UTHR) was one of the biggest losers on the Nasdaq, tanking 62 percent to $18 after it warned that revenue for its Uniprost hypertension drug would be far below expectations.

Qualcomm (QCOM) powered up $7 to $90. The company has signed a memorandum of understanding with China’s Ministry of Information to deploy its CDMA wireless technology across mainland China.

Earlier, PepsiCo (PEP) agreed Monday to acquire Quaker Oats (OAT) and its highly coveted Gatorade sports drink brand for $13.4 billion in stock, ending a closely watched takeover courtship involving several parties.

Quaker shares rose $2.44 to $91.06. Pepsi rose $1.50 to $43.88.

Techs off

Big technology companies were trading lower.

Cisco (CSCO) crawled back from earlier losses after CEO John Chambers reiterated company guidance about strong revenue growth. But the stock couldn’t maintain any momentum, dropping $2.68 to $45.81 after sinking to a 52-week low of $45.

WorldCom (WCOM) fell $1.18 to $14.81 after Lehman Bros. cut its price target.

Intel (INTC) was off $1.11 to $33.02 after hitting a 52-week low of $32.06 on worries about profits. The semiconductor index ($SOX) rose 2.5 percent.

ESS Technology (ESST) plunged 41 percent to $5.96 after warning of a profit and revenue shortfall due to a weak PC market and high inventories.

Shares of Sun (SUNW) gained $1.94 to $78.88 after sinking below $74.

Earnings and data watch

New home sales fell 3 percent to an annual rate of 928,000, while the index of leading indicators fell 0.2 percent, the ninth month in a row the index has been flat or falling. The coincident index fell 0.1 percent, the first decline in 13 months.

The Conference Board said its three economic indexes show a moderating pace of growth.

Home sales, despite October’s drop, have been trending higher, said Ian Shepherdson of High Frequency Economics. “No recession here,” he said.

This week’s earnings calendar includes reports from: JD Edwards, Albertson’s, Comverse Technology, Heinz, Kroger, Movado, National Semi, Ciena and Pier 1 Imports.

The market will have plenty of data to sift through this week — factory orders on Tuesday, the revision to third-quarter productivity, October consumer credit, and the November employment report on Friday. View Economic Preview, economic calendar and forecasts and historical economic data.

Thus far, the fourth-quarter estimate for year-over-year earnings growth for S&P 500 companies has dropped to 10 percent from the 15.6 percent expected on Oct.1, First Call said. And since Oct. 1, expectations for the first quarter of 2001 have dropped to 10.5 percent from 14.2 percent.

Also in the background, important court rulings could be forthcoming in the next few days from the Supreme Court and from Florida courts that may give a clearer picture about who the next U.S. President will be — a cloud that’s been hanging over the markets since Election Day. See our full election coverage.

Treasury action

Treasurys sold off their previous gains on the political news and as the Nasdaq recovered. The benchmark 10-year note fell 1/32 to 101 22/32 to yield 5.52 percent. The 30-year bond was off 8 ticks, yielding 5.66 percent.

Other indicators

The euro continued to climb against the dollar, gaining 1.1 percent to 88.87 cents. “It doesn’t seem to be intervention. Rather it seems to be concern at U.S. growth prospects coming through,” said Peter Bale, managing editor of FTMmarketwatch.com.

The Bridge commodity index gained 3.11 to 231.84. Natural gas rose to an all-time high of $7.75 per Btu.