Bad News Deflates Markets’ Early Surge

Stocks advanced in a difficult session Thursday that saw the major indexes rise on growing optimism about the economy and then fall back on a report that muddled hopes for a turnaround during 2001.

A profit warning from Microsoft after the market closed positioned Wall Street for another erratic session today.

Investors were cheered early Thursday by an upbeat forecast from Dell Computer and a report by the Conference Board, a New York-based industry group, that pointed to an economic rebound. But the market’s gains faded during the afternoon when the Federal Bank of Philadelphia said business remains weak.

“The market said, ‘Oh, geez, we are not really recovering,’ ” after the Philadelphia Fed released its report, said Todd Clark, co-head of trading at WR Hambrecht. “That’s what did it.”

In the end, the Dow Jones industrial average managed to rise 40.17 points, or 0.4%, to 10,610.00 but was well off an earlier 109-point gain.

Wall Street’s broader indicators closed higher but also gave up some of their early advance. The Nasdaq composite index rose 30.42 points, or 1.5%, to 2,046.59, and the Standard & Poor’s 500 index gained 7.31 points, 0.6%, to 1,215.02.

Early on, the market was heartened by the Conference Board’s announcement that its index of leading economic indicators, a forecasting gauge, rose 0.3% last month, ahead of analysts’ estimates of a 0.2% increase. It was the third straight rise in the indicators.

Among Thursday’s gainers was Dell, up $1.18 at $28.38 after the company said that demand is improving and that it is standing by second-quarter earnings estimates of 16 cents a share. Chip maker Broadcom rose $3.40 to $42.40 after saying it expects business to stabilize in the second half.

In addition, Finnish cellular phone maker Nokia, whose shares have fallen by two-thirds in the last year, rose $2.51 to $19.51 after the company said earnings will rebound in the fourth quarter.

The news from Dell, Nokia and Broadcom provided a respite from the more than 800 profit warnings that have hit Wall Street during the last six weeks.

But until more companies can say business is picking up, analysts say, the market remains vulnerable and choppy trading will continue. So far, many companies have either issued profit warnings or at least said they can’t make predictions about the future because business is so uncertain.

Microsoft, which rose $2 to $72.57 during regular trading, issued a profit warning for the current quarter and fell $3.37 in the extended-hours session.

Nortel Networks, which met profit forecasts late Thursday, declined to make projections. Nortel lost 25 cents in the after-hours session after inching up 17 cents to $7.75 in regular trading.

Intel rose $1.07 to $29.96, and IBM slipped 28 cents to $104. Both companies released mixed earning news this week. Intel on Tuesday beat earnings expectations and IBM on Wednesday met projections, but both said business remains tough and stands to crimp future sales.

Investors rewarded some companies that exceeded earnings estimates, including Eli Lilly, up 71 cents at $77.46.

Advancing issues outnumbered decliners 4 to 3 on both Nasdaq and the New York Stock Exchange. Trading was active.

In the bond market, Treasury prices fell as investors reassessed the outlook for interest rates. The yield on the one-year Treasury bill--which moves in the opposite direction of the price--rose to 3.42% from Wednesday’s close of 3.39%. The yield on the benchmark 10-year Treasury note rose to 5.11%, up from 5.09% on Wednesday.

Market Roundup: C5-6