Smaller Stocks Lead Rebound
Bargain hunters finally took control of the battered stock market on Thursday, as most key indexes rose and--most important--as the number of rising stocks beat the number of those falling.
Technology stocks were particularly hot, lifting the Nasdaq composite index 41.31 points, or 2.3%, to 1,829.51--its biggest rally in five months.
The Dow Jones industrial average inched up 30.90 points, or 0.4%, to 8,577.68, and would have performed much better if not for sharp declines in American Express and two energy stocks.
Some analysts said the market’s performance Thursday suggested the recent sell-off may have ended, at least for now.
The Dow plunged 299 points on Tuesday, its biggest one-day loss since October, amid rising worries about corporate earnings growth, Asia’s economic crisis and President Clinton’s legal problems.
“It’s trying to stabilize and calm down a little bit, but that’s to be expected after how trashed it was,” said Henry Herrmann, chief investment officer at Waddell & Reed.
At its low point on Wednesday, the Dow was off more than 10% from its record high on July 17.
Meanwhile, most foreign markets sank in advance of Wall Street’s opening on Thursday, and Mexico’s key stock index fell below the 4,000 mark for the first time since May 1997.
The U.S. bond market was flat ahead of today’s report on July employment. In currency trading, the U.S. dollar reached a record high against the Canadian dollar.
On Wall Street, the wild action in blue chips in recent sessions gave way to relative calm on Thursday, as the Dow traded in a fairly narrow range all day.
The Standard & Poor’s 500-stock index, a broader blue-chip measure, rose 0.8% to 1,089.63.
An absence of heavy computerized “program” trading left blue chips drifting in and out of positive terrain for much of the day, until they found some late-session poise.
The bigger story was smaller stocks: The Russell 2,000 index of smaller shares rallied 7.93 points, or 2%, to 406.62.
As of Wednesday, the Russell index was down almost 20% from its record high reached in April.
Confirming that bargain hunters finally were hunting among beaten-up smaller stocks, winners topped losers by 26 to 17 on Nasdaq, a better margin than the 17-13 edge winners had on the New York Stock Exchange.
Trading volume also slowed markedly, suggesting a calmer mood on Wall Street. NYSE volume was 768 million shares, down from Wednesday’s 859 million.
The wait for today’s July payrolls data for a snapshot of the economy and a financial policy speech by Japan’s new prime minister, Keizo Obuchi, also encouraged some investors to stay neutral, analysts said.
Wall Street economists have forecast an increase of 35,000 July payrolls, down sharply from the 205,000 jobs created in June. The unemployment rate was expected to remain unchanged at 4.5%.
Today’s data “could get us rallying back to the old highs [in stocks] by late summer,” said Phil Orlando, chief investment officer at Value Line’s Asset Management division. Investors may be cheered by the prospect of moderate economic growth and potentially lower interest rates.
In the bond market the yield on the 30-year Treasury bond was unchanged at 5.67% on Thursday.
Also today, Obuchi will give his first policy speech amid hopes he will introduce radical policies to restart Japan’s economy and help Asia, where financial crisis has trimmed U.S. corporate profits and helped trigger stocks’ slump.
In a potentially ominous sign, however, most Asian stock markets fell again on Thursday.
Also, Mexico’s main share index sank 73.59 points, or 1.8%, to 3,981.73, its lowest level in 14 months, on concern that earnings growth will fall in the face of a global economic slowdown.
The Mexican market has fallen nearly 32% in dollar terms this year.
In currency trading the dollar jumped to $1.53 Canadian, a record high, as traders increasingly speculate that Canada’s currency is vulnerable to a sharp devaluation.
Among Thursday’s highlights:
* Big tech stocks led the market higher, with Intel soaring $2.88 to $87, Texas Instruments up $1.38 to $61.38 and Applied Materials up $1.06 to $35.13.
* In the Internet sector, Yahoo jumped $3.50 to $87.38, and Broadcast.com soared $6.50 to $56.50.
* Telecom issues up sharply included General Instrument, up $2.44 to $28, and Tellabs, up $2.56 to $73.56.
* Retail stocks also rallied on strong July sales numbers. Dayton Hudson rose $1.94 to $47; J.C. Penney gained $2.38 to $56.88; Wal-Mart soared $3 to $64; and Wet Seal gained $1.38 to $28.88.
* Smaller stocks advancing included Sunrise Medical, up $1.25 to $13.69; Celestial Seasonings, up $1.50 to $39.25; and Emulex, up $2.19 to $9.50.
* On the downside, energy stocks fell, even as crude oil prices rose, as tension between Iraq and U.N. weapons inspectors increased.
Losses in Exxon, down $1.25 to $64.94, and Chevron, down $1.75 to $76.94, weighed down the Dow.
* American Express slumped $7.38 to $101.06. At a meeting with analysts, the company said economic woes in Asia were hurting some operations.
Market Roundup, D6
More Coverage
* A third of U.S. diversified stock funds are down for the year. D4
* Tech stocks surged, propelling Nasdaq to a 2.3% gain. D4
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Fighting Back
How key stock indexes fared on Thursday, and their year-to-date changes:
*--*
Index Thurs.** YTD** M.S. high tech* +3.1% +33.4% Nasdaq telecom +3.0 +35.4 S&P; small-cap +2.3 --5.2 Nasdaq composite +2.3 +16.5 Nasdaq insurance +2.0 --8.1 Russell 2,000 +2.0 --7.0 S&P; 500 +0.8 +12.3 S&P; financials +0.5 +9.8 Dow industrials +0.4 +8.5 Nasdaq bank +0.1 --7.1 Amex oil --1.4 --10.5
*--*
*Morgan Stanley index
**Pctg. change
Source: Bloomberg News
