Market Bulls Help Lift Dow; Most Issues Fall

The U.S. stock market’s “three amigos”--three of Wall Street’s most bullish brokerage analysts--came to its aid Wednesday, helping spur a small rebound in blue chips and perhaps limiting damage in the broader market.

But the mood after Tuesday’s 299-point, 3.4% rout in the Dow Jones industrial average remained restrained, and most stocks closed modestly lower in the second-heaviest trading session ever.

European markets, meanwhile, tumbled, but they ended with losses less severe than that of the U.S. stock slump Tuesday. Asian markets were lower too, but Latin American markets recovered with U.S. stocks to end with minor losses.

In the bond market, yields rose after sliding the day before.

On Wall Street the Dow closed up 59.47 points, or 0.7%, at 8,546.78, after being down as much as 125 points in late trading.

Buying in the final half-hour spread from blue chips to other stocks. The Nasdaq composite index edged up 2.56 points to 1,788.20, after having sunk as low as 1,750.81.

At the Dow’s low point, the 30-stock average was off more than 10% from its July 17 record high. That may have triggered some buying from investors who rely on computer programs to buy at predetermined points.

“There are some incredible buys out there,” said Jim Glickenhaus, a partner at Glickenhaus & Co., which oversees $6 billion. The firm has been purchasing shares of Chrysler, Ford Motor and Merrill Lynch, among other companies.

Still, more stocks fell than rose: Losers topped winners by 3 to 2 on the Big Board, and by a slightly greater margin on Nasdaq.

NYSE composite volume, at 859 million shares, was the second-heaviest ever, surpassing Tuesday’s 853 million. Only the 1.2-billion-share volume of Oct. 28 was greater.

The battered Russell 2,000 index of smaller stocks again closed lower, down 0.7% to 398.69. It is off nearly 20% from its April peak.

*

Blue chips, at least, got a boost after strategists Abby Joseph Cohen of Goldman, Sachs & Co., Jeffrey Applegate of Lehman Bros. and Edward Kerschner of Paine- Webber Group made comments rebutting the idea that a bear market--usually defined as a drop of 20% or more in indexes such as the Dow--is underway:

* Cohen called the latest market drop an “overreaction” and insisted that “stocks are trading at undervalued levels.”

Despite recently weak corporate earnings in some industry sectors--one of the key catalysts behind the market’s slump--”We reiterate our constructive view on the long-lasting economic and profit expansion in the United States,” Cohen told clients in a memo.

* Applegate said the market is merely undergoing a “correction” and that “the preconditions for a sizable bear market--usually involving a significant decline in corporate profits--are absent.”

“We don’t think it makes any sense to try to market-time around this correction,” he said, repeating his view that the Standard & Poor’s 500 index should hit 1,250 by year’s end--which would be a 16% gain from Wednesday’s close.

* Kerschner said there is no “fundamental justification” for stocks’ pullback, and reiterated that “it is very likely that 12 to 18 months from now stocks will be 20%-plus higher.”

Echoing Cohen, Kerschner said, “The profit picture [for corporate America] is not in jeopardy.” He said figures showing low-single-digit earnings growth overall for blue-chip companies over the last two quarters were skewed by weakness in energy, commodity and technology industries.

*

Nonetheless, Frank Gretz, analyst at Shields & Co., said that with the Dow still off 8.5% from its recent peak, “I think there is some real damage here. You are probably close to a short-term low, but we don’t seem to be there.”

Rising bond yields suggested that some money that had fled to bonds was working its way out again, perhaps back to stocks.

“There aren’t a lot of willing bond buyers out there,” said Robert Fernald, who manages about $1 billion in bonds at Society Asset Management in Cleveland.

The yield on the benchmark 30-year Treasury bond inched up to 5.67% from 5.63% on Tuesday. The dollar also lost ground.

In the European markets, German stocks slid 1.8%, French shares lost 1.8%, British stocks gave up 1.8% and the Spanish market lost 2%. But those were less severe declines than the 3.5% drops in most U.S. stock indexes on Tuesday. Europe’s markets have been among the world’s strongest this year.

Losses in depressed Asian markets were limited, with Tokyo shares off just 0.2% and Hong Kong stocks down 1.5%.

In Latin American markets, Mexico’s main stock index dropped as low as 4,007 but finished off just 0.4% at 4,055.32.

*

Among Wednesday’s U.S. market highlights:

* Tech stocks helped lift the market, in the wake of Cisco Systems’ strong earnings report. Cisco gained $3.63 to $96.75, IBM rose $1.94 to $128.75, Sun Microsystems jumped $2.38 to $47.81 and Intel rose $2.25 to $84.13.

But America Online fell $3.63 to $107.38, and Earthlink Networks fell $1.13 to $33.25.

* Drug stocks rebounded from Tuesday’s shellacking, with Merck up $2 to $121.13, Warner Lambert up $2.75 to $71.69 and Pfizer up $1.38 to $105.88.

* Financial issues were mixed. Merrill Lynch fell $2.63 to $87.50, but NationsBank rose $1.94 to $76.75 and Citicorp was up $2.38 to $156.38.

* Energy stocks continued to slide, with Exxon off 94 cents to $66.19, Tosco down $2.19 to $24.31 and Mobil down $1.13 to $64.06.

* Some retail stocks rallied, with Wal-Mart up $2.63 to $61 and Nordstrom up $1.56 to $30.38. But J.C. Penney slumped $2.50 to 54.50, and Just for Feet plunged $3.13 to $17.63, leading a big decline in shoe retailers’ shares on worries about rising competition.

Market Roundup, D8