Calm Follows Storm; Market Indexes Mixed
The stock market’s stunning swings Tuesday gave way to a much calmer session Wednesday--and one dominated by bargain hunters for most of the day.
Major indexes closed mixed, but the majority of stocks on Nasdaq and the New York Stock Exchange ended higher.
Beaten-down technology and biotech shares led the rebound, though they faded near the end of trading--a reminder, analysts said, that many investors may still be eager to take profits in those previously hot sectors.
The Nasdaq composite index closed up 20.33 points, or 0.5%, at 4,169.22, pulling back in the last hour from a 138-point gain.
The Dow industrials lost 130.92 points, or 1.2%, to 11,033.92.
On Tuesday the market had one of its most volatile days ever, with the Nasdaq index plunging 13.6% in the first few hours, only to resurge and end the day off just 1.8% in record trading of nearly 2.9 billion shares.
On Wednesday investors were torn between hunting for bargains and waiting for the dust to settle after Tuesday’s head-spinning session.
Ultimately, the largest, best-known technology names finished on the upside, with Oracle up $2.31 to $78.25, Apple up $3.06 to $130.38 and Texas Instruments up $4.25 to $150. But even those stocks closed below their best levels of the day.
Overall, winners still topped losers by 23 to 20 on Nasdaq and by 17 to 13 on the New York Stock Exchange. By contrast, losers had swamped winners by 32 to 11 on Nasdaq on Tuesday.
Trading was active on Wednesday, but Nasdaq volume of 1.9 billion shares was about a third less than Tuesday’s record.
Sentiment was helped by comments from Abby J. Cohen, chief investment strategist at Goldman Sachs, who delivered an upbeat message at a White House conference on the “new economy.”
“For the past decade, we have been enthusiastic about the outlook for U.S. stock prices in the United States, and we remain so,” Cohen said.
Last week, Cohen’s recommendation that clients pare their stock holdings modestly had helped spark the latest market downturn.
Tuesday’s massive early sell-off was blamed in part on “margin calls”--dumping of stocks by speculators who had borrowed to buy shares in recent months, and whose lenders were demanding payment in the wake of the steep slide in many tech shares in recent weeks.
On Wednesday, technical analysts who follow the inner workings of the market were pleased at the recovery in some big-name tech stocks, and by the fact that the market’s gains were relatively broad-based.
However, the late-day Nasdaq sell-off signaled that investors remain jittery, and that many people are likely to view rallies over the next few weeks as selling opportunities, analysts said.
Though investors snapped up many biotech and Internet-related stocks Wednesday, and small-stock indexes posted impressive rebounds (the Standard & Poor’s index of 600 smaller shares rose 1.7%), many Wall Street pros expect the large-cap tech stocks such as IBM and Oracle to continue to lead any recovery in the sector.
Even some of those names struggled Wednesday. Intel traded as high as $134 but ended down $2.88 at $129.88.
Some analysts said Nasdaq is unlikely to fall below the 3,650 mark touched at the low Tuesday. But some believe the index could slide again later this week or early next week.
“If you take a look at some of the highflying stocks from the first quarter, some of them really have some work to do” to recover, said Brian Belski, chief investment strategist at George K. Baum & Co.
Gregory Nie, a technical analyst at First Union Securities, believes that if Nasdaq can’t stage, and hold on to, a solid recovery soon to the 4,400 or 4,500 level, stocks could be in for a larger drop.
There is a danger of a “failure rally,” Nie said, in which stocks move higher for a couple of days but quickly give way to another bout of selling that dampens psychology.
“It’s not so much that you break down, it’s do you get a failure rally that confirms that breakdown?” Nie said.
In particular, analysts said, they will watch the market’s breadth in the coming week. If falling stocks begin to outnumber winners on a daily basis, that would signal a lack of buyers in the market, and could portend another sharp sell-off.
Meanwhile, mutual fund investors showed little overt reaction Wednesday to Tuesday’s market whiplash.
Several fund companies--including Vanguard Group, Janus, Invesco and discount brokerage Charles Schwab--reported normal or lower-than-normal investor call volumes and transaction activity on Wednesday.
T. Rowe Price and Fidelity Investments were among several firms that said they have received net new investments into their stock funds this week--suggesting that many fund investors were again “buying the dip.”
In foreign trading, most European markets sank 2% to 3% on Wednesday in the aftermath of Wall Street’s wild Tuesday.
Among Wednesday’s highlights:
* Brokerage analysts rode to the rescue of some beaten-down tech stocks. I2 Technologies, a business-to-business service provider for the electronic commerce industry, surged $10.56 to $105 after Donaldson, Lufkin & Jenrette boosted its rating on the stock.
But a reiterated “buy” rating on Infospace by Merrill Lynch couldn’t keep the stock from falling $2.42 to $105.13.
* Other Internet names closing lower included Homestore.com, down $3.38 to $36.75, and About.com, down $3.56 to $56. But Inktomi gained $2.38 to $160.38 and DoubleClick gained $7.38 to $80.75.
* Chip stocks were among the day’s leaders. Motorola jumped $12.38 to $147 and Emulex gained $10.69 to $94.
* Next Level Communications rocketed $46.88 to $128.13 after Bell Canada announced plans to submit a large order for the firm’s equipment.
* Coca-Cola slid $4.75 to $47.63 as investors reacted to the company’s revised growth outlook, which was less optimistic than many hoped.
Day’s Winners, Losers, C11
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
Fighting Back
After tumbling 123 points at the opening Wednesday, the Nasdaq composite index rallied to a 138-point gain for the day before backing off near the close. Half-hourly data:
*
Wednesday close: 4,169.22, up 20.33
*
Source: Bloomberg News
