http://dailynews.yahoo.com/h/nm/20010516/bs/markets_stocks_dc_2363.html

Wednesday May 16 4:19 PM ET
Stocks Roar, Dow Shoots to 8-Month High

NEW YORK (Reuters) - Stocks rocketed higher on Wednesday, with the Dow Jones industrial average (^DJI - news) rising to an eight-month high and closing above 11,000 for the first time since late last summer, as investors reasoned five interest-rate cuts by the Federal Reserve (news - web sites) all but ensure a return of strong corporate-profit growth.

The blue-chip Dow average shot up 343.15 points, or 3.16 percent, to 11,216.12, according to the latest data. That marked the Dow's highest close since Sept. 12, and the first finish above 11,000 since Sept. 14. It was the Dow's fifth-largest point gain ever.

The Nasdaq Composite Index (^IXIC - news) jumped 80.94 points, or 3.88 percent, to 2,166.52. The benchmark Standard & Poor's 500 Index (^SPX - news) leaped 35.56 points, or 2.85 percent, to 1,285.00, the highest close in four months.

The rally took root about one hour into the trading day, when early bearishness on the Fed's warning late Tuesday about economic weakness evaporated with buying that snowballed through the day, a delayed positive response to the central bank's fifth rate cut this year. The serial reductions in rates are part of the Fed's campaign to prevent the flagging U.S. economy from slipping into recession by lowering borrowing costs for businesses and consumers.

``There is a ton of money out there and whenever people see a rally, they say, 'Hey, maybe I better put some money to work here.' That and a subway token will get you a ride uptown,'' said Ned Collins, a trader at Daiwa Securities America, skeptical of the rally one day after the latest cut in borrowing costs. ``I just don't believe we have come to the end of profit warnings and I think earnings are going to be key.''

Bullish comments out of software maker BEA Systems Inc. (NasdaqNM:BEAS - news), chip equipment maker Applied Materials Inc. (NasdaqNM:AMAT - news) and doughnut maker Krispy Kreme Doughnuts Inc. (NasdaqNM:KREM - news) helped boost sentiment a day after the Fed slashed rates by 50 basis points.

A milder-than-expected read on inflation also lifted Wall Street's mood. The Consumer Price Index (news - web sites), a key inflation indicator, rose 0.3 percent in April, less than the 0.4 percent gain expected by economists, according to the Labor Department (news - web sites). Tame inflation could clear the way for the Fed to continue its series of aggressive rate cuts, analysts said.

-- Anonymous, May 16, 2001

Answers

CLEARLY .....ALL....."BUSH's FAULT".

LOLOL

-- Anonymous, May 16, 2001

Hell if this keeps up in no time we will be almost back to where we were before the coup started, BhahahahaWHooooohehehe!

-- Anonymous, May 17, 2001

Jeez, Charlie; the ONLY ONES who have been claiming RECESSION since just after December 12 or so are (hope you're sitting down)...

Bush and Cheney.

Now get a grip, will you? They **suck** as an administration and soon even you of the stubborn brain will realize this.

-- Anonymous, May 17, 2001

THAT GOVERNMENT GOVERNS BEST..........WHICH GOVERNS LEAST.

THOMAS JEFFERSON.

When I want anyone in D.C. to do some "administration", I will let them know. For now, I welcome the continuation of the policy started in 1980 through Mr. Clintstone to the current work of GWB. HANDS OFF UNLESS NECESSARY.

There is LITTLE evidence of a recession just some "warning signs" after 9 long years of expansion. The rate of GROWTH SLOWED not the overall numbers. Cheney warned that such was possible in November. Alan G. is acting as he has to and it begins to look like the expansion will resume after some "stumbling". High Tech will recover nicely because it depends on NEW PRODUCTS, not finding markets for old ones in new packages.

Americans can deal with recession, high gas prices, and even a losing Irving Cowboys football team. WHAT WE CAN"T LIVE WITH IS A "GOVERNMENT" INTEFERING WITH BUSINESS OR THE PRIVATE LIVES OF AMERICAN CITIZENS. That is why the boring one could not win.

-- Anonymous, May 18, 2001

Charlie, you missed my point entirely. Sigh.............

Shrub doesn't HAVE a "hands off" policy -- EXCEPT his buddies' businesses. Everything else is FAIR GAME ..... even if he and his "administration" have to CREATE THE RIGHT SITUATION. Hence, the moron's talk of RECESSION since 'round about December 12 or so. (Hint: Think Really Big Tax Cut for the Extremely Wealthy.)

He made a damn mess of Texas, which you are all now trying to clean up. He now wants to do EXACTLY THE SAME THING to the **entire country**. Please, try to pay attention here. It's not difficult if you'd just take off the damn blinders.

Why do I even bother.....

-- Anonymous, May 18, 2001

What exactly was the "mess" he made in Texas ?

Certainly not the fictional one the democrats try to describe. Clearly not the one that took us from the sideways economy of Anne Richards to the good times we have now. FULL EMPLOYMENT PLUS with no welfare. Improving schools for the growing population of the state that flew past NY as the 2nd largest in the US.

-- Anonymous, May 19, 2001

When your schools are ranked 50th out of a possible 50, you got nowhere to go but up. (You shouldn't make this so easy, Charlie.)

But for you of the stubborn brain, here's a Free Clue: Think really big tax cut for the incredibly wealthy without taking **actual mathematics** into account. And if THAT one doesn't drive you completly nuts (knowing how you feel about **science** and **mathematics**).....

Like I said; I don't know why I bother. Stay in your little delusional world if it makes you happy.

-- Anonymous, May 19, 2001

http://www.greenspun.com/bboard/q-and-a-fetch- msg.tcl?msg_id=005FaX

Yes, cutting 250 bp in just five months (something of a record for the Fed, I think) pumps a lot of liquidity into the system. But there are limits to what that can accomplish. Alas, the Dow already stands at twice its historical average of valuation, with a P/E of 24 (26 for the S&P 500)--more overvalued than in 1929,in fact. U.S. corporate and personal debt have surged 65% in just the past five years, and there are signs that the housing and mortgage refinancing booms, which have propped up the sagging U.S. economy, are ending, especially since mortage rates have actually risen in recent months, as has the yield on the longer Treasury bonds as bond traders expect the wanton Greenspan cuts to fuel inflation. In Europe, a broad money supply growth of 4.5% or more per year is considered inflationary; the Greenspan Fed is increasing the U.S. broad (M3) money supply at a 13% annualized rate. Furthermore, U.S. industrial utilization stands at only 78% (i.e., 22% is idle), the worst in ten years; mfg. layoffs in the first quarter set a record; corporate defaults in the first quarter set a record; home equity as a percentage of mortage is at the lowest ever recorded; ditto for the U.S. savings rate, which has gone from 10% of disposable (post-tax) income to -1% in the past ten years; and inflation, even by the outrageously fudged numbers used by the govt. (see brilliant analyses of Crudele et al.) is rising--not surprisingly, given the surges in oil, nat. gas, and electricity in the past year. (This year California will spend $70 billion for electricity, wrecking the state budget; last year it spent $7 billion.) There are few signs of recovery in the tech sector, with component prices (e.g., DRAM) still falling; Compaq and Dell are preparing for a price war to the death in the PC market. The tech sector is only 5.4% of the U.S. economy, but it has been responsible for much of the (admittedly exaggerated) increase in worker productivity in recent years. The last quarter, U.S. worker productivity actually fell 0.1%--a very ominous sign. Even the vaunted "service sector," supposedly 80% of the U.S. economy, is now contracting, according to the latest purchasing managers' index (PMI) number of 47 (anything less than 50 signals contraction); a leading service sector economist recently predicted massive layoffs coming in the service industries.

Overall, S&P 500 earnings fell, quarter over quarter, about 6% in the first quarter according to Thomson Financial/First Call, and are projected to fall a whopping 11% in this second quarter. Given that context, the recent rise in the Dow looks a bit absurd, even granting that Wall Street is supposedly looking six months ahead. Warren Buffett recently said that American investors are living in a "dream world"; John Kenneth Galbraith called the speculation on Wall Street (in an open letter to President Bush) "insane"; George Soros says it threatens the entire world financial system. We are 30% of the world economy, and I find that foreign analysts routinely refer to the great American "economic bubble" and wonder what in hell will happen when it pops. What, indeed. Overseas, Argentina and Turkey are in financial crisis; Germany, accounting for 1/3 of the EU economy, is in recession, with industrial production tumbling dramatically in recent months; and Asia is building toward another financial crisis, with the Japanese Nikkei and yen weakening, big Chinese banks with loan problems, the Hang Seng sliding, and Taiwan, Thailand, Indonesia, Singapore (whose economy is contracting at an 11% annualized rate, despite having the region's healthiest banking system), Indonesia, Malaysia, and S. Korea all in significant economic trouble.

Recently surveying the record corporate and personal debt load in the U.S., and noting that the U.S. economy is, in its overcapacity, geared toward an endless consumer buying frenzy (that's the way most of our equities are priced, too, alas), the London "Financial Times" said this can't go on much longer. That point seems obvious to the rest of the world, but not to U.S. "analysts," many of whom work for investment banks or brokerage houses and reap huge bonuses dependent on escalating stock prices. (Many companies also engage in fraud by exaggerating their earnings, according to former SEC chairman Arthur Levitt in a recent "Newsday" article.) These analysts are currently telling their clients that, with all the Fed "easy money" out there, corporations will quickly return to profitability and that S&P 500 earnings will rise 18% next year. Investors are told to buy, buy, buy; consumers are told to buy, buy, buy.

We shall see what happens.

-- Don Florence (dflorence@zianet.com), May 19, 2001.

-- Anonymous, May 21, 2001

bold off

-- Anonymous, May 21, 2001