SIVY ON STOCKS from CNNmoney.com
October 22, 2001

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Anticipation

Stocks are rallying on hopes for 2002, despite mixed third-quarter results.

By Michael Sivy

Stocks advanced strongly on Monday, despite mixed news on the earnings
front. At the close, the Dow was up 172 points, or nearly 1.9 percent,
while the Nasdaq composite climbed 2.2 percent. The market seems to be
adjusting to the risk of further terrorist incidents and has taken the
latest anthrax scares in stride -- a marked change from last week.
Investors are also anticipating strong earnings gains next year and appear
unfazed by mixed third-quarter results.

Several leading companies announced third-quarter results or provided
earnings guidance on Monday. The most upbeat news came from tech, where
Applied Materials [AMAT], the leading maker of semiconductor-manufacturing
equipment, outlined impressive growth opportunities at a technology
conference. CEO Dan Maydan said the company's total revenues could double
by 2005. Applied Materials stock jumped nearly 7 percent on the news, and
other tech giants posted strong gains. Intel was up nearly 5 percent on the
day, while Microsoft rose nearly 4 percent.

Financial services also gained despite a pretty dismal report from American
Express [AXP]. The company said that cardholders had cut back substantially
on dining and shopping following Sept. 11. As a result, third-quarter
results were down 60 percent from a year ago and were also substantially
below what analysts expected. Nonetheless, the share price rose $1, or 3.4
percent. Other leading financial stocks also gained: J.P. Morgan [JPM]
advanced 4.2 percent, while Citigroup [C] moved up 2.5 percent.

The Dow's biggest gainer on Monday was Minnesota Mining & Manufacturing, up
more than 5 percent despite a down earnings report. The manufacturer of
Scotch Tape and Post-it Notes reported a 21 percent decline in
third-quarter earnings. Results were in line with expectations, however,
and analysts gave 3M [MMM] good marks for reducing costs.

Among only a handful of losers in the Dow, SBC Communications' [SBC] share
price sank more than 5 percent after the company reported an earnings
decline that was slightly worse than consensus estimates. For the quarter,
profits were down 31 percent because of weakness across the board -- in
business, consumer and wireless services. The company is planning more
layoffs and cost reductions and said that earnings weakness will likely
continue well into next year.

Analysts will watch fourth-quarter trends closely because of the importance
of sales during the holiday season. But investors already know business
will be lousy through the end of the year. The key question is the outlook
for 2002 profits. So don't spend too much time puzzling over third-quarter
reports. What determines where stock prices go from here will be evidence
that supports or undercuts expectations of a strong first quarter. In the
stock market, as in fine dining, anticipation counts for a lot.

###

Read all of Michael's columns at:
http://money.cnn.com/markets/sivy/

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