Stocks zoom higher; Nasdaq up 5%

Stocks zoom higher; Nasdaq up 5%

Dell Computer reaffirmation awakes the
bulls

NEW YORK (CBS.MW) – The bulls were indeed in charge Thursday and
bargain hunters emerged in force right out of the gate, allowing all of
the major indexes stellar gains.

A reaffirmation from Dell Computer of its earnings outlook lit the
bulls’ fire and investors scooped up tech stocks, handing the Nasdaq a 6
percent gain and the Nasdaq 100 a 7 percent advance.

In sector action, virtually all groups headed significantly higher,
with only the defensive utility and gold sectors dripping in red ink.
Mammoth advances were seen in the Internet, hardware and software
groups. In the broad market, bank and brokerage stocks surged, by far
leading on the upside. Biotech, chemical, drug and oil service shares
also put on a nice show.

The Dow Jones Industrial Average ($DJ) rallied 290 points, or 3
percent, to 9,805.

The Dow’s frontrunners were shares of Intel, Hewlett-Packard,
Microsoft, Citigroup, General Electric, Honeywell and 3M. Only one Dow
stock – SBC Communications – eked out a loss.

And Acoa (AA) climbed 5 percent. The first Dow stock to kick off the
first-quarter reporting season posted earnings-per-share of 46 cents,
beating the First Call/Thomson Financial estimate by three cents. In
comparing the first quarter of 2001 with last year’s first quarter,
Alcoa said a significant drop in demand, lower metal prices and
increases in energy costs reduced the benefits derived from cost
reduction programs and the positive impact of acquisitions. The stock
closed up 3.2 percent on Wednesday.

The Nasdaq Composite ($COMPQ) surged 93 points, or 5.7 percent, to
1,733 while the Nasdaq 100 Index ($NDX) tacked on 94 points, or 6.9
percent, to 1,465.

The Standard & Poor’s 500 Index ($SPX) jumped 2.7 percent while
the Russell 2000 Index ($RUT) of small-capitalization stocks climbed 2.3
percent.

Volume came in at 224 million on the NYSE and at 445 million on the
Nasdaq Stock Market. Market breadth was incredibly positive, with
advancers crushing decliners by 18 to 6 on the NYSE and by 23 to 6 on
the Nasdaq.

Specific movers

Dell Computer (DELL) surged 10.4 percent to $24.50. The PC maker said
it will reaffirm its first-quarter outlook at its analyst meeting in New
York on Thursday, with earnings-per-share expected to meet the current
First Call/Thomson Financial estimate of 17 cents a share on sales of $8
billion.

"We believe Dell’s internal plan was substantially higher than
the plan they presented to the Street," commented Merrill’s Steve
Fortuna in a note to clients, adding that even if the company falls
short of its internal plan, Dell should come in at or above the forecast
plan of 10 percent top-line growth.

While markets finally had some good news to chew on, they also had to
process more warnings. But the bulls appeared to be taking bad news in
stride.

Storage outfit Emulex (EMLX) announced that it now sees fiscal
third-quarter earnings of 13 cents a share due to continued sagging
demand. The company said it has "insufficient visibility to provide
guidance on future quarters at this time," indicating that order
patterns need to stabilize. The stock rallied 12 percent.

In analyst actions, meanwhile, Lehman Brothers’ Holly Becker upped
its rating on Yahoo (YHOO) to a "buy" from a "market
perform," indicating that it’s "time to jump in."

"We believe estimates are finally low enough and valuation is
much more reasonable with the stock at less than $13. Also, we think the
downside on the stock is protected by takeover potential," the
analyst said in a research note issued Thursday morning. While she
acknowledged the call "may be a bit early," she said she’s
convinced that the worst is over and that the risk-reward on shares is
favorable for investors with a long-term horizon. Yahoo jumped 21
percent.

Merrill Lynch’s Joe Osha lowered its intermediate-term rating on
Advanced Micro Devices (AMD) to "neutral" from
"accumulate" while Micron Technology (MU) was cut to
"neutral" from "buy." The analyst said the move was
based on his belief that demand from the low end of the PC business may
not be meeting previous expectations.

Osha said he needs to see a convincing demand follow-through to
support continued intermediate-term optimism for the stocks. "Our
checks do not suggest that we’re getting that follow-through," he
concluded. AMD rose 4.7 percent while Micron added 5.2 percent.

Treasury focus

Not surprisingly, government bonds slipped as investors anticipated
lofty gains in equities.

The 10-year Treasury note was off 12/32 to yield ($TNX) 4.97 percent
while the 30-year government bond shed 10/32 to yield ($TYX) 5.50
percent.

In economic news, weekly jobless claims climbed by a
larger-than-expected 18,000 to 383,000. The week’s main event on the
economic front is Friday’s employment report for March, which includes
the release of non-farm payrolls, the unemployment rate and average
hourly earnings. View Economic Preview and economic calendar and
forecasts.

"The uptrend in claims continues — this week’s number is the
highest since July 1998, and next week we think there is a
better-than-evens chance that claims will breach the 400,000 level for
the first time since October 1992. Claims are not a reliable short-term
indicator of non-farm payroll numbers, but they do point more clearly to
a significantly higher unemployment rate over the coming months,"
commented Ian Shepherdson, chief U.S. economist at High Frequency
Economics.

He expects to see the jobless rate nudging up to 4.3 percent in
Friday’s report and rising to 5 percent by the end of the summer.

In the currency arena, dollar/yen dropped 0.8 percent to 124.24 while
euro/dollar edged down 0.2 percent to 0.8989. The Bank of England
lowered short-term rates by 25 basis points Thursday morning to stave
off the impact of slowing overseas economies. It’s the BOE’s second rate
cut this year and a move that was widely expected by the market. See
related story.