Out of the ashes

Stock market's surge is first since tragedy

NEW YORK — Wall Street sounded a buoyant note Monday, and most showbiz stocks surged, erasing some of the dire losses of the previous week.

The upswing came even as AOL Time Warner cautioned of higher newsgathering costs and shortfalls in revenue and cash flow this year. Walt Disney and Viacom had issued similar warnings in the days following the Sept. 11 terrorist attacks in New York and Washington, D.C.

The Dow Jones Industrial Average jumped 368 points, or more than 4%, in its first positive session since trading resumed one week earlier. The New York Stock Exchange, which sits in the former shadows of the World Trade Center Towers, had been closed for an unprecedented four days running, after the Sept. 11 terrorist attacks. It reopened Sept. 17, and the DJIA plunged more than 14% last week, its worst performance since 1933.

Monday, investors were hit with a round of upgrades, downgrades and conflicting advice from market strategists. Well-known Wall Street pundits including Abby Joseph Cohen of Goldman Sachs urged investors to buy stocks; others warned them to stay away.

Yet, many market players clearly favored the idea that battered shares, showbiz included, may have hit bottom. Even Disney shares nudged up 0.17% to $17.90, though far less than the uproarious gains logged by nearly all its peers. Disney is facing rocky times at its theme parks and cruise ships, along with lower ad revenue.

Meanwhile, Ticketmaster’s Nasdaq-listed shares fell 71¢, or 6.5% to $10.20. Tumble followed Lazard Freres’ cutting revenue forecast for the ticketing services giant over disaster-fallout concerns.

High steppers

But elsewhere among media and entertainment, things were much more upbeat.

Vivendi Universal soared nearly 11% to $45, and AOL Time Warner rose 8.9% to $32.50.

AOL TW said after the market closed that revenue this year will rise only 5%-7%, instead of the more than 10% originally anticipated when the conglom completed its merger in January. Cash flow will be up 20%, instead of 30%, it said.

Analysts have been skeptical for months that the company would meet its targets ($40 billion in revenue and $11 billion in cash flow) despite two rounds of layoffs, a price hike in its AOL Internet service and a big magazine purchase in the U.K. After the news, AOL Time Warner shares shed several dollars in after-hour trading.

News Corp. gained 7.4% to close at $25.30, and Viacom was up 6.5% at $33.13. Morgan Stanley Dean Witter upgraded Viacom to a “strong buy” from “outperform.”

Bearish outlook

First Union Securities’ Scott Davis slashed his 2002 operating cash flow estimates by 7% for AOL Time Warner, 9% for Viacom and 19% for Disney.

“In light of the complete lack of visibility regarding how far the economy could weaken and when things will improve, we believe there may be no reason to own anything in media for those clients with a short-term investment horizon,” he said in a research note.

Longer term — meaning 12 to 18 months — there are some bargains, he said. He thinks the best buys are AOL Time Warner and Univision. Shares of the Spanish-lingo broadcaster surged 21% Monday to close at $22.50.

While pleased at the uptick, he and others stressed that the political and economic uncertainty that weighed on financial markets so heavily last week hasn’t changed. The market is highly volatile and recession is still likely, he opined.

Investors will be listening carefully to consumer confidence indicators due out this morning.

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