Dow Ekes Out Gain but Most Stocks Fall

Wall Street suffered broad losses for a fourth consecutive session Wednesday, although stocks closed well above the day’s lows.

In another extremely volatile session, the Dow Jones industrials finished up 8.14 points at 5,354.69 after recovering from a 76-point early-morning plunge.

The Nasdaq composite index of mostly smaller stocks ended down 6.70 points at 1,042.37 after falling as low as 1,017.

“If you don’t like where the market is, just wait a minute,” said Arthur Hogan, head stock trader at Dean Witter Reynolds. “These things are fluctuating so much it’s just driving everybody crazy.”

At the close, losing stocks outnumbered winners by 3 to 1 on Nasdaq and by 2.7 to 1 on the New York Stock Exchange, in heavy trading.

Still, some traders were encouraged by buyers’ reappearance as stock prices plummeted again early Wednesday.

“The market was hit at the open by several waves of selling, but diminishing waves,” said Thom Brown, a managing director of Rutherford Brown & Catherwood. “That’s good market action,” he said. “We’re getting all the weak holders shaken out.”

But some analysts had argued that the market’s “correction”--its first serious pullback since 1994--had run its course last week, when trading volume hit record levels. That proved to be a premature call, as stocks have continued to slump this week.

The Standard & Poor’s 500-stock index, which eased 0.22 point to 626.65 on Wednesday, now is off 7.6% from its record high. The Russell 2,000 index of smaller stocks is down 15.6% from its peak.

Stocks’ slump this month has been triggered by concerns over rising interest rates and slowing corporate earnings growth. The big question is whether investors are worried enough to turn what is so far a typical market correction into something much more severe.

“I think there are some things that are changing that are going to make it hard to go forward,” said Greg Summerville, chief investment officer at Kirr, Marbach & Co. in Columbus, Ind. In particular, he worries that many companies are facing squeezed profit margins in the second half of this year as labor costs rise and companies are unable to raise product prices.

On Wednesday, however, some second-quarter earnings reports cheered investors. Chemical giant DuPont, for example, rose 2 5/8 to 77 1/4 even though its quarterly profit of $1.78 a share was below expectations. DuPont said it expects improving results in the second half.

Also, Compaq Computer gained 3 1/4 to 48 1/4 after saying profit rose nearly 9% in the quarter, better than expected. Its margins also improved.

The stock market’s afternoon recovery took place without any help from bonds. Yields jumped after investors gave a poor reception to the Treasury’s auction of $12.5 billion in five-year notes, where the average yield was 6.63%. The ratio of bids received to notes offered was 2.16 to 1, indicating surprisingly low demand.

The 30-year T-bond yield rose to 7.04% from 6.97% on Tuesday.

Signs of waning investor demand are “very scary” with the Treasury looking to sell three- and 10-year notes early next month, said Marcello Frustaci, a note trader at Daiwa Securities America.

Among Wednesday’s highlights:

* Many battered technology stocks rebounded after steep early losses. Hewlett-Packard gained 2 5/8 to 43 5/8 after falling as low as 40 1/8. BMC Software dropped as low as 55 3/4 before rallying to close up 2 1/2 to 59 1/2.

Other tech gainers included Cisco Systems, up 2 to 49 1/8; Seagate, up 1 1/2 to 40 3/8; U.S. Robotics, up 3 to 66; and Internet firm Spyglass, up 1 3/8 to 16.

IBM, which is to report earnings today, added 1 1/2 to 91 3/4.

* The Dow’s rebound was paced by DuPont; Boeing, up 1 7/8 to 85 7/8; and American Express, up 1 to 42 3/8.

* Auto stocks were broadly lower, with GM down 1 1/4 to 46 5/8, Chrysler down 1 to 26 3/4 and Ford off 1/8 to 31 7/8.

* Earnings reports helped boost U.S. Surgical 2 7/8 to 31 5/8. Cadence Design rose 2 1/8 to 25 1/8, Baker Hughes was up 3/8 to 32 and Norfolk Southern gained 1/2 to 81 1/8.

Overseas, most foreign stock markets tumbled in the wake of Wall Street’s slump Tuesday. Tokyo’s Nikkei-225 index dropped 2.5% to 20,631, its first close below 21,000 in four months.

London’s FTSE-100 index slid 1.1%, Frankfurt’s DAX index lost 1.1% and Mexico City’s Bolsa index sank 2% to 2,943.03.