Economic report, JDS earnings propel markets

A positive economic report helped the Dow Jones industrial average climb 2 percent Friday, while solid earnings from JDS Uniphase carried tech stocks to slightly higher ground.

The Nasdaq composite index rose 6.18 to 3,278.36, and the Standard & Poor's 500 index climbed 15.14 to 1,379.58.

The Dow rose 210.50 to 10,590.62, led by J.P. Morgan, which climbed $12.81 to $158.50.

Tech stocks also helped the Dow. At the end of regular trading, Microsoft closed up $3.25 at $67.69; Intel rose $1.69 to $46.38; and Hewlett-Packard inched up $1.19 to $87.19.

The Dow finished the week up almost 4 percent from last week's close, while the Nasdaq dropped nearly 6 percent, and the S&P lost 1 percent for the week.

"It's still sloppy and choppy out there," said market strategist Bryan Piskorowski at Prudential. "The (market) bottom is taking longer to find than everybody thought."

Piskorowski believes that a close election, weak European currency, and high energy prices are some of the main factors that worry investors.

"There are a list of reasons to be bearish," added Sunil Sharma, a research analyst at Lehman Brothers.

Earnings from JDS helped stabilize the tech sector. The company said after markets closed Thursday that its fiscal first-quarter loss widened on acquisition-related costs. Sales of the fiber-optic components maker rose 171 percent, more than expected.

Analystsboosted their outlooks for the company after JDS executives said they expect fiscal year 2001 sales to rise 115 percent to 120 percent, up from an earlier forecast of 90 percent. The stock closed up $2.81 at $77.25 Friday.

JDS hangs tight in rocky market Jim Laing, analyst, WR Hambrecht

Investors also heard some good economic news on Friday: The U.S. economy slowed dramatically in the summer to a 2.7 percent growth rate, less than half the pace of the previous quarter, as American businesses and the federal government cut back on spending and home construction dropped sharply.

The increase in gross domestic product (GDP) for the July-September period followed a 5.6 percent annual growth rate in the second quarter, the Commerce Department reported. GDP is the nation's total output of goods and services and the broadest measure of economic health.

The news means that the economy is not in danger of overheating, and it's less likely that the Federal Reserve will raise interest rates when it meets again Nov. 15.

The Federal Reserve has raised interest rates six times since June of 1999 to slow the economy and control inflation. Higher interest rates make it more expensive to borrow money, which diminishes the amount of money flowing throughout the economy and lessens demand.

"The Fed will be a key player in determining the course of the economy going forward," said Sharma, who believes the Fed's management of the economy has been "right on the money" so far.

Sharma noted that the Fed could start lowering rates if the GDP continues to fall and productivity starts to slide.

Investors received a scare earlier this week from Nortel Networks, which helped pull down the entire optical networking sector.

The telecommunications equipment maker said Tuesday that third-quarter earnings rose 64 percent, but sales numbers fell short of some expectations. Shares of Nortel fell nearly 29 percent following the report, stoking investor concern over the once red-hot optical networking sector. On Friday, Nortel fell $2.81 to $42.56.

But confidence in the sector may be returning. Ciena rose $1.38 to close regular trading on Friday at $104.38.

The CNET tech index climbed 25.78 to 2,591.53. Advancers led decliners, with 59 of the 97 stocks in the index rising, 37 falling and one remaining unchanged.

Of the 18 sectors tracked by CNET Investor, wireless companies were the day's largest gainers, climbing 5 percent. Service providers for Internet companies posted the sharpest drops, falling 4 percent.

Ariba, Inktomi and VeriSign helped drag the Internet services sector down. Ariba dropped $12.81, or almost 10 percent, to $120.44; Inktomi fell $15.06, or 18 percent, to $67.94; and VeriSign lost $15, or about 11 percent, to $127.31.

Ingram Micro rose $2.69, or 20 percent, to $15.94 and traded as high as $16.50. The computer distributor said it had third-quarter net income of 26 cents a share. It was expected to earn 25 cents a share, the average estimate of analysts polled by First Call/Thomson Financial.

Shares of Nextel Communications rose $6.06, or 21 percent, to $34.88. The stock had dropped more than 20 percent Thursday after the wireless telephone company said it may add fewer customers than expected in the fourth quarter.

American Power Conversion shares fell $8.50, or 40 percent, to $12.75 after the company, which makes devices that protect computer networks from power surges, reported fiscal third-quarter profit that was below analysts' forecasts.

Profit from operations for the quarter, which ended Oct. 1, fell 4.8 percent to $59.1 million, or 30 cents a share, from net income of $62.1 million, or 32 cents a share, in the year-earlier quarter. The company was expected to earn 33 cents a share, the average estimate of four analysts polled by First Call/Thomson Financial. Revenue rose 11 percent to $395 million from $355.9 million.

Chip stocks dropped. The Philadelphia semiconductor index retreated 20.37, or almost 3 percent, to 685.60, led by chip equipment makers Teradyne, which lost $2.94, or 9 percent, to $28.06, and Applied Materials, which fell $4.94, or 9 percent, to $48.18.