Stocks recovered from their long springtime swoon in New York when the Dow Jones Industrial Average closed up more than 300 points, thanks in part to positive news from Cisco, the computer networks giant. The Nasdaq closed up more than 120 points.
While it was the Dow's biggest jump in eight months, analysts cautioned against reading too much into a single day's buying spree. The buying stampede hardly made up for weeks of sliding numbers. And other sudden rallies have proven unsustainable over a longer period.
"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 per cent, at 10,141.83. It was the biggest point and percentage gain since 24 September, when the Dow clawed back some of the losses sustained in the wake of the 11 September terrorist attacks.
The Nasdaq, meanwhile, rose 122.47, or 7.8 per cent, to 1,696.29, its biggest points gain since 18 April, 2001.
Richard McCabe, at Merrill Lynch, added to the warnings against over-optimism. "I think the jury is still out here. I think we are near the bottom but I am just not convinced that today marks the start of a long-term advance," he said. He noted that the Cisco news was like a "little match in a dry forest" setting off an unexpected fire.
Investors focused on news Cisco had tripled earnings in the third quarter as cost cuts took effect, rather than its executives' cautious outlook for the rest of the year. Merrill Lynch itself featured after news emerged that the brokerage firm may be close to a settlement with the Attorney General of New York on conflicts of interest between its analysts and investment bankers. The news prompted a wide uptick in financial stocks.Reuse content