NEW YORK >> Amazon.com has been a great investment for investors who bought the stock two weeks ago. They've nearly doubled their money. Tech rally brings
bulls out of hidingOnce-battered stocks amaze investors
by nearly doubling in two weeksBy Amy Baldwin
Associated PressAmazon closed yesterday at $15.78, up 95 percent since April 4, when it dipped to a 52-week low of $8.10.
Investors who have purchased Microsoft and Intel -- up 71.4 percent and 45.7 percent from their respective lows -- haven't done so badly either. These stocks are part of the once-battered technology sector that soared over the past two weeks.
Behind the big gains was a combination of better-than-expected first-quarter earnings by companies like Intel and Microsoft and the Federal Reserve's fourth interest-rate cut this year. The tech comeback gave the Nasdaq composite index enough power to reclaim the 2,000 level for the first time since mid March.
The Nasdaq has also recovered 32 percent from its low close for the year of 1,638.80, reached April 4. In fact, it was this statistic that analysts were talking up this past week -- as opposed to lamenting that the Nasdaq is still down nearly 60 percent from its March 2000 high of 5,048.62.
Still, analysts are uncertain how long the trend up will last, pointing out that stocks will have a brief window between the first-quarter earnings announcements going on now and second-quarter profit warnings likely to start in June.
Even with that note of caution, suddenly, it's easier to find bulls on Wall Street. "The bear market is over and we are back in the bull market again," said Al Mirman, market strategist for V Finance in Sarasota, Fla.
"We have reached ground zero," said Tony Cecin, director of institutional trading for US Bancorp Piper Jaffray. "Certainly in technology we have reached that point."
Given the Fed's aggressive rate cuts and companies' improving outlooks for the second half of 2001, investors are feeling more secure about buying tech stocks. They're even selling safer blue chips, including drug and consumer product issues, to fund tech purchases.
After the Fed unexpectedly cut rates 0.5 percentage point Wednesday to stimulate the economy, the Nasdaq and the Dow Jones industrials posted triple-digit gains, and investors finally got the kind of session they've hungered for. The day saw extremely heavy volume and a wide margin between advancing stocks and decliners.
"While there are no guarantees, there are signs that the recovery in the economy may come in the latter part of this year," said Charles Pradilla, investment strategist at SG Cowen Securities.
Among the positive signs for the economy, Pradilla said, is evidence that companies like Intel are working off onerous inventories that have dragged down profits. Intel, which last month lowered prices on some of its chips, said Tuesday sales have stabilized.
Some bullishness is also creeping cautiously into some companies where chief executives now say they see better business on the horizon.
Hewlett-Packard CEO and chairwoman Carly Fiorina offered some hope Wednesday, saying business should improve somewhat in the third quarter, with revenue flat with the previous year. "We are talking about this quarter being a bottom," Fiorina said.
While analysts are pleased with the market's turnaround, they also know that stocks are likely to encounter some volatility in the months ahead.
Many think some pullbacks -- as seen in Friday's session when the Nasdaq lost 18.73 and the Dow fell 113.86 -- are desirable. "We were going like a house of fire. The last thing you want to see is for this thing to blow out again," said Larry Wachtel, market analyst for Prudential Securities. "The reason we had this bear market was we got valuations up too quickly and they weren't supported by the fundamentals."
The Dow finished the week up 452.91, or 4.5 percent, at 10,579.85. The Nasdaq advanced 201.98 or 10.3 percent for the week. It closed Friday at 2,163.41. The Standard & Poor's 500 index ended the week up 59.48 or 5.0 percent after falling 10.71 to 1,242.98.