Dow Bounces Back 171 on Net, Banking Rally
Stocks rebounded from a four-day slump Wednesday as the banking and Internet shares that faltered earlier this week came roaring back.
The Dow Jones industrial average rose 171.07 points, or 1.6%, to close at 10,702.16.
In a single, volatile session, the index of blue-chip stocks wiped out more than half its losses since Friday. Four straight losses had pushed the Dow 5% below its May 13 record of 11,107.19. After Wednesday’s rally, the Dow is 3.6% off its all-time high.
Broader indicators also rose, recovering early losses. The Standard & Poor’s 500 gained 20.36 points to 1,304.76, and the technology-heavy Nasdaq composite index rose 46.27 points to 2,427.17.
Analysts said the market was ready for a bounce, as the U.S. economy remains strong and the outlook for corporate profits remains rosy, at least for the next quarter.
“Conditions are quite good,” said Tony Dwyer, chief equity strategist at Ladenburg Thalmann & Co. “IBM is solid, and the financials are very strong.”
IBM contributed heavily to the Dow’s surge, soaring $15.06, or 6.8%, to $236.25. Big Blue drew attention as a 2-for-1 split took effect after the market closed. Stock splits often prompt a rally, as investors expect the lower price to entice more buyers, but analysts were reluctant to pin IBM’s gains solely on the split.
Instead, market watchers said, IBM’s stock was unfairly battered in recent sessions as the entire technology sector faltered.
Tech stocks were hit hard as concerns about potentially higher interest rates drew investors away from the steeply priced shares. Through Tuesday, the Nasdaq index had tumbled 10% from its all-time record of 2,652.05, set April 26, meeting the conventional definition of a market correction.
On Wednesday, several industry leaders continued to languish. Intel, which unveiled a new chip design, fell $1.19 to $51.69.
But many Internet-related shares resumed their dizzying gains. Yahoo rose $13.94 to $140.88, and America Online rose $5.31 to $120.31.
“Those stocks were hurt by panic selling,” Dwyer said. “They were ready to come back.”
DLJ Direct, the online brokerage unit of Donaldson, Lufkin & Jenrette, rose steadily in its initial public offering. The shares were priced at $20 and rose to $30, a far cry from the triple-digit gains of previous Internet IPOs but better than the Tuesday debut of Barnesandnoble.com.
The online bookseller had disappointed some traders with a modest 27% gain in its first day of trading. Wednesday, however, Barnesandnoble.com tacked on an additional $2.94 to $25.88.
But Juno Online Services, an Internet e-mail provider controlled by hedge fund manager David E. Shaw, fell below its offer price on its first day of trading. The New York-based company, which has attracted millions of users by offering free e-mail, fell $1.38 to $11.63.
And Edgar Online, a Web site that provides access to corporate earnings reports and other information filed with the Securities and Exchange Commission, was little changed in its first day of trading. The Norwalk, Conn.-based company rose 6 cents to $9.56.
Banking and financial stocks, which have been hit by concerns over interest rates and the year 2000 computer bug, surged as old merger rumors hit the market. Merrill Lynch, often mentioned as a takeover target, soared $10.31 to $78.69. Chase Manhattan Bank, the rumored suitor, rose $1.56 to $75.38. Both companies denied the rumors.
Benefiting from a steady gain in oil prices this week, most petroleum companies rose. Mobil, up $3.25 to $103.06, paced the sector.
The NYSE composite index rose 7.50 points to 624.84, and the American Stock Exchange composite index rose 3.82 points to 782.66. And with most of the gains concentrated in bigger stocks, the Russell 2,000 index of smaller companies rose only 0.96 points, to 435.41.
U.S. bond prices fell for the first time in four days as the Treasury met with lackluster demand at an auction of $15 billion in two-year notes. The yield on benchmark 30-year Treasuries rose to 5.80%, from 5.74%.
Among the highlights:
* Corning rose $5.31 to $53.31, as the maker of optical fiber and environmental products represents a “major buying opportunity,” said an analyst at Salomon Smith Barney. Corning is “selling a winning product into what may be the biggest gold rush [that] fiber infrastructure has ever seen,” she wrote.
* MindSpring Enterprises rose $4.56 to $73.56, as the No. 4 U.S. Internet service said it will split its shares, which have more than tripled in the last year.
* Visx fell $5.38 to $50. The maker of pulsating lasers for vision-correcting surgery faces a patent dispute, a lawsuit and U.S. Federal Trade Commission review over a key patent, according to the Wall Street Journal.
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Market Roundup, C8
