Wall St. flies despite United woes

By Alexandra Twin
CNN/Money Staff Writer

NEW YORK (CNN/Money) -- U.S. stocks staged a strong recovery by the close of trade Wednesday, reversing earlier losses on strength in computer hardware, software, chips and retail and a reversal in Treasurys, with money flowing out of bonds and into equities.

Wednesday is also the day by which almost 700 CEOs of leading companies must certify their financial results. The executives have until 5:30 p.m. ET to do so.

The Nasdaq composite index gained 65.02, or 5.1 percent, to reach 1,334.30. The Dow Jones industrial average added 260.92, or 3.1 percent, to close at 8,743.31; it had been down more than 120 points earlier in the day.

The Standard & Poor's 500 index added 35.41, or 4 percent, to end the day at 919.62.

Treasury prices gave back much of their early gains, although the 10-year note yield still was at multi-decade lows of 4.10 percent. The yield fell below 4 percent earlier before bouncing up. The rotation out of Treasurys boosted equities.

"I didn't see anything fundamental to turn us around. I think it's a combination of program buying and asset reallocation," said Tim Heekin, head of stock trading at Thomas Weisel Partners.

"Bonds finally showed a little reversal. We put in a high on the long-terms and then dipped off of that. I think the big bond funds came in and started taking profits after the recent run. The real test will be if we can hold these levels."

Traders said the stock turnaround was also partly due to short-covering, the process in which investors who have sold shares short to take advantage of a falling market buy them back.

Big tech companies, such as Sun Microsystems (SUNW: up $0.51 to $4.44) and Oracle (ORCL: up $0.96 to $10.05), boosted the Nasdaq on no discernable news, while gains in tech names such as Microsoft (MSFT: up $2.66 to $49.71) and IBM (IBM: up $3.02 to $74.92) helped push the Dow higher.

Retailers also experienced a recovery after Dow component Wal-Mart Stores (WMT: up $3.91 to $52.62) made a late-day announcement that it will buy back up to $5 billion of outstanding shares, a move often seen as a vote of corporate confidence. The No. 1 retailer also said it will expense stock options.

According to a regulatory filing made public Tuesday, computer hardware maker and Dow component IBM (IBM: up $3.02 to $74.92) said it is cutting more than 15,600 jobs, beyond what had been expected, in its computer-services and microelectronics businesses.

Shares of Network Appliance (NTAP: up $1.95 to $9.00) rallied after the data storage computer maker posted a quarterly profit Tuesday and forecast a modest rise in revenue in the current quarter.

Chip equipment maker Applied Materials (AMAT: up $0.96 to $14.42) said it earned 7 cents a share in its third quarter, 2 cents better than estimates and in line with results a year earlier. The company also warned that orders in the current quarter could drop as much as 15 percent. The news had knocked the stock lower earlier in the day, but it recovered in the broader tech surge.

UAL may file for bankruptcy

Stocks in the aviation sector continued to suffer Wednesday in the fallout from US Airways bankruptcy filing earlier this week. The New York Stock Exchange has suspended trading of the stock.

After the close of trade, United Airlines parent UAL (UAL: down $0.29 to $2.45) said that it may be forced to file for bankruptcy court protection in the fourth quarter, barring any last-minute cash infusion that could help it deal with its mounting debt.

Fellow airlines, as well as companies that deal in aerospace and defense such as Dow components Boeing (BA: down $0.71 to $36.35) and United Technologies (UTX: down $1.12 to $61.35), traded lower.

Late in the session, United Technologies reaffirmed 2002 earnings per share of $4.40, a penny better than estimates. But the stock remained a notable Dow laggard.

"Conventional wisdom was that this down cycle with commercial airlines was going to bottom this year. But with US Air declaring bankruptcy, UAL in danger and American scaling back, it's become pretty clear that bottoming is going to be delayed," said Robert Norfleet, an aerospace and defense analyst with Davenport & Co.

"The fear is that orders from these companies will be deferred, delayed or cancelled and that this will negatively impact future profits at the companies that deal in production and parts, which is why these stocks have been down all week," he added.

CEO certification deadline

Wednesday is the final day by which 697 CEOs must certify the results of their most recent quarter, a new policy set up to reassure investors after the spate of accounting and corporate governance concerns that have plagued markets for months.

Officially, 316 CEO certifications are outstanding, according to the Securities and Exchange Commission Web site.

However, the SEC is not able to update its Web site immediately after the filings; the unofficial number of outstanding companies that are both listed and not bankrupt is approximately 71, a far smaller number. In addition, it may not be known immediately how many companies failed to certify on time, as they can get a five-day extension with a request made Thursday.

One of the concerns about the CEO certifications has been the potential for companies to restate results. A number of companies fulfilled that fear Wednesday morning.

On Tuesday, the Federal Reserve released its latest interest rate decision and economic commentary. The central bank acknowledged the economic slowdown by changing its bias to one of weakness from neutral, but also left interest rates unchanged at 1.75 percent, a move seen by some market participants as disappointing.

"The Fed's choice to hold rates steady was no big surprise. People may have been using that as an excuse to sell at the top of a trading range," said Peter Cardillo, director of research at Global Partners Securities. "And we're probably going to be in a bit of a trading range until we get some new economic data that makes people want to move one way or the other."

In the day's economic news, June business inventories rose 0.2 percent, more than the 0.1 percent increase forecast of economists surveyed by Briefing.com. While the news was seen as positive, it appeared to have little impact on trade.