Shares Climb Sharply as Investors Seek Stocks That Will Prevail in Soft Economy
NEW YORK -- Over-the-counter stocks rebounded sharply as investors sought out the shares of smaller companies likely to shine in a shaky economy.</br></br>The Nasdaq Composite Index jumped 5.10 to 534.51, a 0.96% gain, as volume rose to 182.3 million shares from 145.9 million Monday. Advancing shares led decliners, 1,135 to 841, as 129 stocks rose to new highs and 29 fell to new lows.</br></br>Third-quarter earnings reports indicate that small companies are coping better with the recession than larger ones, Prudential Securities Inc. analyst Claudia Mott said in an interview. Profits among 539 smaller companies surveyed by Prudential are down 0.9% from the year-earlier quarter, compared with a 12% drop among larger companies tracked by the firm.</br></br>"Small-company profits may be telling us that these companies have been experiencing a recovery," Ms. Mott said. She's particularly encouraged by a rebound in earnings among smaller concerns in basic industries such as manufacturing, trucking, mining, chemicals and paper. After two years of anemic earnings, third-quarter profits in that group rose 1.5% from a year earlier and are ahead of expectations, she said. Smaller makers of auto parts, household furniture and other economically sensitive goods also exceeded hopes with a 4.2% rise in third-quarter profits, she added.</br></br>Makers of consumer staples and healthcare related companies continued to march ahead, with profits up 45.1% and 42.8%, respectively -- but some health-care earnings came in below expectations, she warned. Smaller financial service concerns turned in rosy earnings for the third quarter. Technology companies, however, continued to disappoint analysts with a 38.7% drop in third-quarter profits.