Late surge boosts stocks
despite earnings warnings

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By Amy Baldwin
Associated Press

NEW YORK >> Buyers still worried about the economy but unable to resist bargain prices went back to Wall Street late in today's session, giving stocks some modest, hard-fought gains.

Investors overcame their misgivings about earnings warnings from Merck and American Express that had sent prices falling for much of the day.

"There is a big desire to get money back to work on (daily) weakness, which is why the bouts of profit taking have been limited. Money wants to get into stocks," said Scott Bleier, chief investment strategist at Prime Charter Ltd.

The Dow Jones industrial average closed up 6.44 at 9,894.81, after falling as much as 81 earlier. The broader market followed the same path, reco- vering from losses in the last 30 minutes of trading. The Nasdaq composite index ended up 9.46 to 2,011.39, having lost 26 points at one point. The Standard & Poor's 500 index inched up 0.31 to 1,137.07, recovering from an earlier 10-point loss.

Decliners outnumbered advancers 8 to 7 on the New York Stock Exchange, with 1,703 down, 1,441 up and 198 unchanged. Volume was 1.40 billion shares.

The NYSE composite index slipped 0.72 to 575.39, the American Stock Exchange composite index fell 1.53 to 816.58 and the Russell 2000 index advanced 0.54 to 475.31.

The Treasury's 2-year note rose 232 to 100 18; its yield fell 3 basis points to 2.93 percent. The 10-year note gained 1532 to 100 332; its yield fell 6 basis points to 4.99 percent. The 30-year bond jumped 1 132; its yield fell 7 basis points to 5.47 percent. The long bond received a boost when the Treasury announced a buyback of certain 30-year bonds later this week. The Treasury said it would buy back up to $1.5 billion worth of certain 30-year bonds with maturities between Nov. 2022 and Nov. 2027.

Analysts were unfazed by the stock market selling that persisted for most of the session.

"The stock market has moved up too far, too fast. And, stocks are having a tough time holding those levels without strong earnings to support them," said Alan Ackerman, executive vice president of Fahnestock & Co.

The Dow is 20.1 percent above its Sept. 21 low for the year of 8,235.81, which ensued from the Sept. 11 terror attacks. The Nasdaq is up 41.3 percent from its low; the S&P, up 17.7 percent.

The market's post-attack comeback is more important than occasional downturns and profit taking, analysts said.

"To come back from that kind of hit is a Herculean feat, and basically states there will be an economic recovery next year," Bleier said.

The market had two reasons for not trading even higher near the close: Dow industrials Merck and American Express.

Merck fell $2.18 to $58.52, having yesterday projected no growth in earnings per share next year, mainly due to expiration of the patent on its key ulcer drug, Prilosec.

American Express declined 84 cents to $33.42, after warning today of weaker profits in the fourth quarter, and announcing 5,500 to 6,500 job cuts.

The market drew some strength from a positive outlook from Dow industrial Procter & Gamble. P&G soared $3.25 to $79.95, following an announcement yesterday that it expects to beat analysts' earnings estimates for the current quarter by 2 to 3 cents a share.

After the market closed, chip equipment maker Applied Materials said it will cut 1,700 positions, or 10 percent of its work force, in response to the downturn in the semiconductor industry.

The global cuts are the latest move by Applied to save money as demand for its equipment has diminished. The company previously reduced salaries, restricted hiring and ordered mandatory days off.

Applied shares closed up 93 cents to $44.87 on the Nasdaq.