New York -- The NASDAQ Composite Index soared to its second-largest gain on record, as investors bought shares of large technology companies on optimism they'll report robust first-quarter profit growth.
Microsoft Corp., scheduled to report on Thursday, led stocks' gains, while Intel Corp. and International Business Machines Corp., which report after exchanges close today, also rose.Industrial, consumer and financial companies, including Johnson & Johnson, Pfizer Inc., Delta Air Lines Inc. and State Street Corp., advanced after beating profit estimates, driving rallies in the Dow Jones Industrial Average and Standard & Poor's 500 Index.
Investors who may have feared a further slide after last week's market plunge now "can step back and say, 'Hell's bells, earnings are wonderful and the economy is great,"' said Donald Coxe at Chicago-based Harris Investment Management Inc., which oversees about $12.5 billion.
The NASDAQ rose 254.35, or 7.2 percent, to 3793.51, extending yesterday's surge and wiping out Friday's 9.7 percent loss. The index has risen 14 percent this week, the biggest two-day percentage gain in its 29-year history.
The Dow Jones Industrial Average gained 184.91, or 1.8 percent, to 10,767.42. The Standard & Poor's 500 Index climbed 40.17, or 2.9 percent, to 1441.61. Almost two stocks rose for every one that fell on the New York Stock Exchange.
More than 1.1 billion shares changed hands on the Big Board, about even with the three-month daily average. About 2 billion shares traded on the NASDAQ Stock Market, according to preliminary figures.
NASDAQ stocks traded for an average 407 times recent earnings when the index set its March 10 record high. After Friday's decline, they traded for 139 times profit. S&P 500 stocks traded for 28 times earnings Friday, down from 33 times when the index set its last record on March 24.
"Investors look at what the prices of these stocks are now compared with a month ago, and they're very cheap," said Coxe, who has been adding to his holdings of Merck & Co. and Delta.
For a second day, stocks surged in the last 30 minutes of the day as investors took the market's resilience as sign that the worst of the decline is over, said Michael Lyons, a trader for Morgan Stanley Dean Witter & Co.
"The feeling is that we did reach a bottom (Friday) and off we go again," said Lyons.
Intel rose 6 to 129. Morgan Stanley Dean Witter & Co. analyst Mark Edelstone raised the stock to "strong buy" from "outperform" and said it could reach 175 in 12 months. Intel will benefit from robust PC demand in the second half of the year, Edelstone said.
Intel, the world's largest computer-chipmaker, was expected to report profit of 69 cents a share, excluding charges and gains, according to the average estimate from analysts polled by First Call/Thomson Financial. The company earned 57 cents for the same period a year earlier.
Microsoft rose 4 11/16 to 80 9/16.
Micron Technology Inc. rose 13 15/16 to 127 15/16 after Edelstone raised the chipmaker to "strong buy" from "outperform" and said the stock could reach 170 in 12 months, up from his previous estimate of 140. Edelstone cited steady demand for so-called DRAM chips.
Companies in the S&P 500 are expected to report average first-quarter profit growth of 20.7 percent, up from the estimate of 17.5 percent at the beginning of the year, First Call data shows. Among the 138 companies to report so far, profit growth has averaged 24.6 percent from the year-earlier quarter.
Some 72 percent of the companies that have reported have beaten analysts' estimates, 22 percent have matched and 6 percent have fallen short.
While technology stocks led the rally yesterday and today, investors have also been buying shares of consumer and industrial companies with relatively low price-earnings ratios. The best performers in the S&P 500 for the past week include Avon Products Inc., Delphi Automotive Systems Corp. and FirstEnergy Corp.
Avon trades at 20 times recent earnings, while Delphi trades at 10 times earnings and FirstEnergy at 10. Not all computer-related stocks gained either. The worst performers in the index in the last week include Compuware Corp., Conexant Systems Inc. and Citrix Systems Inc.
Delta rose 1 1/4 to 50 3/16 after reporting fiscal third-quarter profit of $1.33 a share, more than the $1.10 average estimate from analysts. Delta has climbed 17 percent since its March 7 low.
Johnson & Johnson jumped 4 to 81 1/2. The maker of Tylenol and Band-Aids reported first-quarter net income of 93 cents a share, beating the average estimate by two cents. The stock rose 5.7 percent yesterday.
IBM rose 3 1/4 to 115 1/8 after tumbling 15 percent last week. IBM said after the market closed that first-quarter profit rose to 83 cents a share, beating the average analyst estimate of 78 cents. Still, the world's largest computer maker said revenue dropped 5 percent to $19.3 billion. Analysts had forecast a 3 percent rise in revenue.
Allen Ashcroft, a money manager with Allied Investment Advisors Inc., sold his IBM shares last week at about 118 because he "heard rumblings the quarter is going to be a little weak." Ashcroft helps manage $14.7 billion in Baltimore.
Financial shares rose as first-quarter profit from several banks rose. Wells Fargo Corp. rose 1 3/8 to 40 3/4, Mellon Financial Corp. gained 1 3/8 to 32 5/8 and State Street Corp. rose 7 5/16 to 97 1/2. All three reported earnings that beat analysts' estimates.
American Express Co., which is scheduled to report Monday, rose 5 15/16 to 139 15/16 and J.P. Morgan & Co. gained 5 1/2 to 130 1/2. Northern Trust Corp.--which, like State Street, is in the investment management business--jumped 11 3/16, or 19 percent, to 70, recovering last week's loss.
Paine Webber Group Inc. rose 2 11/16 to 41 1/2 after it reported first-quarter net income of $1.16 a share, beating the average analyst's estimate by 7 cents. Commissions at the fourth-biggest U.S. brokerage firm by number of brokers rose 41 percent. The stock has fallen 8.7 percent in the past month.
Pfizer Inc., up 17 percent this year, rose 1 9/16 to 39 9/16 after the No. 2 U.S. drugmaker, which markets the impotence pill Viagra, reported first quarter results of 28 cents a share, more than the 25-cent average estimate.
Tiffany & Co. rose 5 1/2 to 71 after the jewelry retailer said its first-quarter earnings will be at least 37 cents a share, which would beat the average 29-cent estimate from analysts. The stock has fallen 21 percent this year.
RealNetworks Inc. jumped 7 5/16 to 41 5/16 as investors snapped up shares of the software maker before its earnings report, due after the market closes. The stock, which peaked at 93 7/16 on Feb. 10, fell 67 percent through Friday.
"It's time to load up the truck with this stock," Lehman Brothers Inc. analyst Michael Stanek said in a report today. RealNetworks has an 85-percent share of the market for software that plays audio and video from the Internet, and it sells for 13 times this year's expected revenue, versus 25 to 28 times for a basket of Internet infrastructure companies, Stanek said.
Vitesse Semiconductor dropped 10 1/2 to 62 9/16. Vitesse reported a fiscal second-quarter profit, excluding a charge for expenses from an acquisition, which matched analyst forecasts. Still, Credit Suisse analyst Charles Glavin cut his rating on the No. 1 maker of non-silicon telecommunications chips to "buy" from "strong buy," citing an unexpected decline in revenue at one of Vitesse's businesses.
DLJDirect Inc., the Internet brokerage business of Donaldson, Lufkin & Jenrette Inc., rose 1 to 10 9/16 after reporting first-quarter net income of 13 cents a share, more than the 4-cent loss analysts expected, as trading soared.
Coca-Cola Co. fell 13/16 to 47 11/16 after the world's largest soft-drink company said it had a first-quarter loss as bottlers cut orders for the syrup that's made into soft drinks. The stock has fallen 17 percent this year.
Tyco International Ltd. fell 2 1/4 to 43 5/8 after meeting analysts' 50-cent average estimate for the fiscal second quarter.
Other companies expected to report earnings today include America Online Inc. and Qualcomm Inc. This is the busiest week for first-quarter profit reports.