Stocks chalk up
best day of year

The Dow rockets 305 and the
Nasdaq jumps 122 after Cisco
tops earnings forecasts

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By Lisa Singhania
Associated Press

NEW YORK >> Unexpectedly strong profits at Cisco Systems delighted investors starved for good news today, sending the Dow Jones industrials up more than 300 points and the Nasdaq composite index higher by more than 120.

It was Wall Street's biggest rally in about eight months. But analysts cautioned against reading too much into the advance, attributing it more to a rebound from recent selling, than any improvement in sentiment or business. They also noted that the market has developed a habit of rallying unsustainably.

"Investors have been waiting for a reason to buy. The catalyst today was Cisco," said Jack Francis, managing director at UBS Warburg. "But this is just a snapback rally. Nothing fundamental has changed in corporate America and I don't think this is a turnaround."

The Dow closed up 305.28, or 3.1 percent, at 10,141.83. It was the biggest point and percentage gain since Sept. 24, when the average advanced 368.05 and 4.5 percent.

Broader stock indicators fared even better. The Nasdaq rose 122.47, or 7.8 percent, to 1,696.29, its biggest point gain since April 18, 2001, when the index advanced 156.22. It was the eighth-largest percentage gain ever.

The Standard & Poor's 500 index was up 39.36, or 3.8 percent, at 1,088.84, its biggest point increase since April 18, 2001 and biggest percentage gain since Sept. 24.

Advancers led decliners 3 to 2 on the New York Stock Exchange, with 2,017 up, 1,176 down and 207 unchanged. Volume was 1.48 billion shares vs. 1.35 billion shares yesterday.

The NYSE composite index rose 13.87 to 579.22, the American Stock Exchange composite index gained 3.24 to 949.34 and the Russell 2000 index climbed 10.77 to 509.75.

The Treasury's 2-year note fell 1 1/32 to 100 532; its yield rose 18 basis points to 3.29 percent. The 10-year note lost 1532 to 97 1432; its yield gained 16 basis points to 5.21 percent. The 30-year bond lost 1 2632 to 95 2932; its yield rose 13 basis points to 5.66 percent.

The sharp rally was triggered by Cisco, which climbed $3.19, or 24.4 percent, to $16.27 after reporting higher-than-expected third-quarter profits late yesterday. The network equipment maker and technology industry bellwether stopped short of predicting a recovery, though -- saying instead that it expected little growth in the coming quarter. Still, that didn't curb Wall Street's buying.

Cisco rival Juniper Networks rose $1.19, or 14.1 percent, to $9.62, while software company Microsoft jumped $5.50 to $54.97, helped by a surge in European sales of its Xbox video game systems.

Financial stocks also were strong on reports that Merrill Lynch and the New York attorney general were working on a settlement in the investigation of alleged conflicts of interest at the nation's largest brokerage firm. Merrill rose $3.31 to $43.95, an 8 percent increase, while Lehman Brothers advanced $4.10 to $64.50.

The enthusiasm had limits, however. Dynegy tumbled $1.11, or 9.1 percent, to $11.15 after the energy trader said the Securities and Exchange Commission intends to upgrade its probe of a natural gas contract into a formal investigation.

Consumer goods companies, which are considered safer, albeit lower-return investments, also were weaker as investors shifted into technology and other more aggressive sectors. Philip Morris fell 56 cents to $55.06.

The trading was among the most positive the market has seen in weeks, but most analysts said it was likely only bargain hunting on the market's recent losses, rather than the beginning of a recovery.

Francis, the UBS Warburg director, believes today's rally will falter. "There might be another day of gains that we get out of this but it will eventually run out of steam," he said.