Stocks Stage Late Rally

Blue-chip stocks on Thursday staged a late rally as dismal news and forecasts from the likes of Hewlett-Packard, Corning and Compaq Computer were offset by a wave of bargain-hunting.

``The market continues to shake off the newest (negative) developments,'' said Keith Gertson, head of Nasdaq trading for Deutsche Banc Alex Brown. ``Every day the resistance continues, it builds conviction that the market is building a base. Most people anticipate a rally of 3-5 percent because the market has absorbed the bad news so well.''

The Dow Jones industrial average rose 49.96 points to close at 10,455.63, recovering from triple-digit losses earlier in the day. The technology-dominated Nasdaq Composite Index jumped 38.64 points to close at 2,022.96 — above the psychologically important 2,000-point level. Initially, the Nasdaq and Dow each fell more than 1 percent, then began a steady ascent that accelerated through the afternoon.

The broader Standard & Poor's 500 Index added 12.44 points at 1,202.93.

Many analysts didn't expect the upturn to last, though, noting that the fundamental problems that led to the market's selloff Monday and Tuesday haven't disappeared.

``We've had some pretty shaky days and it's nice to have a rebound. But we're not off to the races yet. There's still too much weakness in second-quarter earnings and the projections for the third quarter are not encouraging,'' said Matt Brown, head of equity management at Wilmington Trust.

Printer and computer maker H-P said its revenues for the current quarter would fall 14 percent to 16 percent from a year ago, as the global economic slump hits its consumer business. It also said it would cut 6,000 jobs to save $500 million annually. 

H-P shares closed down $1.68, or 6.5 percent, at $24. Earlier, the shares fell to $23.45, a low unseen since November 1996.

The market recovered from the initial shock from computer giant Compaq, which posted sharply lower profits and sales and said revenue would continue to slide in the coming months as a worldwide slump spread. Compaq fell 14 cents to $13.98 on Thursday.

The H-P and Compaq news should come as little surprise to investors, considering the volume of gloomy results and bleak forecasts that have pelted investors in recent days, said Michelle Clayman, chief investment officer at New Amsterdam Partners. ``Yet the market still sells off when the reports hit the tape, so I would expect things to stay fairly sloppy for a while.'' 

Investors, however, reacted positively to Corning Inc., the world's largest fiber-optic cable maker, which posted a loss due to the slowdown in the telecommunications industry. But sales rose, with shares climbing $1.79 to $15.56. 

``Maybe investors are becoming just a little bit immune to the earnings news,'' said Charles Payne, analyst at Wall Street Strategies. 

Another bright spot was WorldCom Group, the data and Internet business of WorldCom Inc., which rose $1.17 to $14.52. The company's profits matched Wall Street's expectations, even as they slumped because of pricing pressures and increased competition. The company said prices in the telephone and data services market appear to be stabilizing after several quarters of weakness. 

Viacom Inc. rose $3.58 to $50 after a top executive at the media conglomerate said the advertising market has reached a bottom. The company also had stronger results, thanks to its cable networks division. 

Oil stocks were modestly higher in line with gains in crude oil prices, a day after the OPEC cartel confirmed more output cuts. Every stock in the S&P international oil index rose, including Exxon Mobil Corp., up 59 cents at $42.72, and Texaco Inc., up 73 cents at $68.28.

Investors shrugged off the latest economic reports, which painted a mixed picture of the economy, preferring instead to focus on the barrage of earnings. 

Durable goods orders dropped sharply in June, pointing to lingering weakness in the manufacturing sector, more than the 0.8 percent drop economist had expected. In May, orders had risen 2.7 percent. 

Wall Street will closely watch the vital indicator for the health of the economy on Friday, when the government reports its initial reading of second-quarter gross domestic product. Economists polled by Reuters expect growth of 0.9 percent. 

Results continued to pour in from Corporate America in the busiest week of the reporting period. Dow Chemical Co., the No. 2 U.S. chemical company, reported income fell 57 percent as a slowing economy hurt its chemicals and plastics business. Its shares ticked up 20 cents to $34.89 anyway. 

Business software maker Vignette Corp. climbed 96 cents to $7.80 after saying its third quarter loss could be less than analysts' consensus and that the company could turn a profit by the end of the year.

Strong gains were recorded in Dow stocks, including American Express, which gained 71 cents to $38.77, and Boeing, which advanced $1.44 to $58.11.

Advancing issues narrowly led decliners on the New York Stock Exchange. Volume came to 1.21 billion issues, compared with 1.25 billion Wednesday.

The Russell 2000 index rose 8.08 to 485.07.

Overseas, Japan's Nikkei stock average dropped 0.3 percent. European stocks fared better. Germany's DAX index rose 1.7 percent, Britain's FT-SE 100 advanced 0.2 percent, and France's CAC-40 gained 1.4 percent.

The Associated Press contributed to this report.