Wall Street Investors Hope for an Encore
It may have been the most overdue rally in history. Now, can it last?
The battered Nasdaq composite index leaped a record-shattering 10.5% on Tuesday and other market indexes also surged after Federal Reserve Chairman Alan Greenspan said economic growth has slowed and hinted that the central bank might cut interest rates next year.
His comments, along with increasing speculation that Vice President Al Gore will have to concede the presidential race, unleashed a furious rally that was spearheaded by beaten-down technology stocks.
But more important than Tuesday’s action might be what happens in coming days--whether the buying is sustained or fizzles, analysts say.
On Tuesday, Nasdaq shot up 274.05 points to 2,889.80, ending at its high for the day, thanks to huge gains in large and mid-size tech stocks. Cisco Systems surged 14%, Oracle rose 12% and Intel gained 9%. Some mid-size issues gained 25% or better.
The rally also extended to blue chips, lifting the Dow Jones industrial average 338.62 points, or 3.2%, to 10,898.72, and the Standard & Poor’s 500-stock index 3.9%.
Stocks also were stoked as Treasury bond yields plunged anew, taking their cue from Greenspan.
The rally sparked enthusiasm on Wall Street that tech stocks might finally have hit a bottom after descending almost without interruption since early September.
Though Greenspan’s words were clearly the catalyst Tuesday, some experts said the Nasdaq market might have bottomed Thursday: A violent sell-off in that session, on near-record volume, might have washed out the bulk of the remaining selling pressure, some pros said.
Tuesday’s sharp rebound has been long in coming; many traders have been saying for weeks that some sort of “relief rally” was overdue. “You get, if nothing else, a recovery [rally] because stocks are so depressed,” said Alfred Kugel, senior investment strategist at Stein Roe & Farnham in Chicago.
But whether the rally can continue depends on many factors, including investors’ perception of the economy’s weakness, and the willingness of loss-ridden tech investors to hold on.
Bullish analysts say Tuesday’s surge could spark a year-end rally if institutional investors who have built up sizable cash reserves put that money to work for fear of sitting out a prolonged advance.
Traders who have “shorted” stocks, betting on lower prices, also could fuel a rally if they rush to close out their bets.
“The sustainability of the bull market is better than it’s been in some time,” declared Michael Kenneally, investment chief at Banc of America Capital Management.
Others say that stocks, particularly fallen tech stars, are unlikely to continue rallying so vibrantly. Though the market might not drop below last Thursday’s lows, stocks might simply bounce back and forth for a while as investors grapple with the outlook for corporate earnings and other worries.
Though he believes the market has hit bottom, mutual-fund manager Louis Navellier expects the rally to ease up in the next few days. “I’d be ecstatic if we can do 100 points [on Nasdaq today], and that’s the most we do,” he said.
Gregory Nie, technical analyst at First Union Securities in Chicago, said that if history is any guide, Nasdaq may move sideways for a couple of months in a “base-building” mode. After Nasdaq’s three previous major declines--in 1974, 1987 and 1990--each time, the market danced sideways for about two months before beginning a notable move higher, Nie said.
Some traders warn that year-end tax-loss selling by individuals is likely to dampen any advance, as people with deep losses attempt to sell into any market recovery.
Despite the size of the gains in major indexes Tuesday, analysts noted that the market’s breadth wasn’t overwhelmingly bullish: Winners topped losers by 27 to 12 on Nasdaq and by about 2 to 1 in the New York Stock Exchange.
Also, Nasdaq volume was very strong at 2.5 billion shares, but it trailed Thursday’s 2.6 billion.
Still, the day belonged to the bulls, many of whom believe buyers will materialize quickly if the market appears to have truly bottomed. “No one wants to be the first one in the door” to buy after a lengthy decline, Kenneally said. “But if we get a strong day [today] . . . to support the notion that it’s a sustainable rally, both volume and price will advance.”
Among Tuesday’s highlights:
* Networking stocks led the tech sector. Sycamore Networks gained $13.50, or 29%, to $59.94; Ciena rose $19.63, or 24%, to $99.81; Juniper Networks climbed $26.52, or 20%, to $156; and Nortel Networks improved $4.19, or 11%, to $40.63. Industry leader Cisco Systems jumped $6.31 to $52.13.
* Texas Instruments led semiconductor stocks higher, up $6.06, or 15%, to $45.69. Applied Materials rose $5.63, or 15%, to $44.13 and LSI Logic rose $2.61, or 14%, to $20.80.
* Shares of Network Appliance, a data-storage provider, surged $23.69, or 41%, to $81.56, after rival EMC Corp. introduced new products aimed at smaller companies. Uncertainty about the new EMC products had weighed heavily on shares of both companies in recent weeks, but analysts said Thursday that they posed no threat to Network Appliance. EMC picked up $10.44, or 13%, to $89.94.
* Brokerages led financial stocks higher on expectations for lower interest rates. Charles Schwab rose $3.69, or 14%, to $29.75 and Morgan Stanley Dean Witter jumped $8.06, or 13%, to $72. Bank, insurance and home-building stocks also jumped on interest-rate hopes.
* On the losing side, consumer stocks such as drugs, which had risen recently amid the market turmoil, backed off. Merck fell $1.94, or 2%, to $90 and Schering-Plough dipped 69 cents to $54.50. Food, energy and utility issues also fell.
Market Roundup: C8, C9
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GREENSPAN SPEAKS
The Fed Chairman suggests rates might be cut. A1
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Greenspan Fires Up the Bulls
Federal Reserve Chairman Alan Greenspan, below, strongly hinted Tuesday that the central bank stands ready to cut interest rates sooner than later if the economy slows too sharply. The news fueled a broad rally in stocks and bonds, especially in the battered technology sector.
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Software
Goldman Sachs software index, monthly closes and latest
Tuesday: 343.20
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Networking
Amex networking index, monthly closes and latest
Tuesday: 912.23
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Semiconductors
Philadelphia semiconductor index, monthly closes and latest
Tuesday: 607.41
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Sources: Bloomberg News, Times research
Bulls Rush In
Here are some of the biggest gainers in the U.S. stock market on Tuesday, and how their stocks have fared year to date:
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Tues. close Tues. pctg. YTD pctg. Stock and change change change Tibco Software $55.88, +$14.44 +34.8% +9.6% Emulex 159.88, +34.19 +27.2 +42.1 PMC-Sierra 127.00, +26.94 +27.0 +58.4 FreeMarkets 32.13, +6.44 +25.1 -90.6 Siebel Systems 90.38, +16.94 +23.1 +115.2 Sun Microsystems 91.75, +12.88 +16.3 +18.5 Yahoo 43.88, +5.94 +15.7 -79.7 Nokia 51.38, +6.81 +15.3 +7.6 3M 116.63, +11.63 +11.1 +19.2 Intel 36.00, +3.06 +9.3 -12.5 S&P; 500 1,376.54, +51.57 +3.9 -6.3
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Source: Reuters, Bloomberg News
