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Rate cut hopes power US blue chips ahead

Upbeat earnings from consumer products giant Procter & Gamble coupled with hopes of interest-rate cut from the US Federal Reserve powered blue chip stocks ahead.

Technology stocks, meanwhile, hovered at break-even, despite the world's largest mobile phone maker, Nokia's gloomy earnings forecast for this year.

But the damage was limited, putting a damper on telecom names, while other high-tech stalwarts traded higher.

With the latest economic data showing US consumer confidence at its lowest level in four years, investors bet that the US central bank will cut rates aggressively, by half a percentage point. Lower interest rates are positive for stocks because they reduce the cost of doing business, thereby boosting corporate profits and spur economic growth.

The blue-chip Dow Jones industrial average jumped 109.41 points, or 1.02 per cent, to 10,811.60, helped by Procter & Gamble, which rose $3.70 to $70.55 on upbeat earnings.

The broad Standard & Poor's 500 Index was up 1.70 points, or 0.12 per cent, at 1,365.87.

The tech-laced Nasdaq Composite Index, which had earlier weaved in and out of positive territory, was down 13.24 points, or 0.47 per cent, at 2,825.10.

The central bank's Federal Open Market Committee's meeting, which began on Tuesday morning, ends Wednesday afternoon.

Strengthening the view that the Fed was likely to cut the key Fed funds rate by a half-point was data from the Conference Board showing that its Consumer Confidence Index slumped in January to 114.4 from an upwardly revised reading of 128.6 in December. The reading -- the lowest since December 1996 -- fell well below expectations for a drop to 124.2.

But analysts said the data also raised questions about how deep and how protracted the economic slowdown might turn out to be, and market participants will be scanning every bit of economic data for more clues.

"The possibility of a half-point cut is already priced in, mostly in the Nasdaq which has done very well over the last few weeks," said Peter Coolidge, managing director of equity trading at Brean Murray & Co.

"The problem to the market is what happens after this cut," he said. "There are two things that matter: consumer confidence, and the market is looking for signs that this will improve, and earnings and revenue forecasts from companies looking forward."

Finland's Nokia, the most heavily traded stock on the New York Stock Exchange, fell $2.27 to $34.72.

Nasdaq's top tech names were a mixed bag, but telecom names were mainly lower, including wireless technology company Qualcomm Inc., off $3-1/4 at $83-9/16, global communications company Worldcom Inc., off 3/8 at $22-3/8 and wireless communications services firm Nextel Communications, down 11/16 at $35-3/8. Other losers included Web gear maker Juniper Networks and network computer maker Sun Microsystems.

"The wireless business is not great but I don't think that (Nokia's news) has any shock value now," said Arnold Berman, technology strategist with Wit Soundview.

"We are getting great reactions to bad news ... there is a very good chance here that the stocks are telegraphing fundamental improvement not that far down the road," he said.

Computer chip shares underpinned the Nasdaq market. High-speed communications chip company Broadcom rose $2-1/2 to $112-3/4 while sector leader Intel Corp. rose 1/2 to $37-9/16. The Philadelphia Stock Exchange's semiconductor index gained 1.99 per cent.

A big loser was network storage equipment maker Brocade Communications Systems Inc., which plunged $9-15/16 to $95, after a Goldman Sachs analyst made cautionary statements about the company's stock in a morning call.

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