Nasdaq Gets Pre-Holiday Boost but Can’t Erase Week’s Losses
Santa Claus finally arrived on Wall Street on Friday, giving the beleaguered Nasdaq composite index its strongest performance in more than a week and its fifth-biggest percentage gain ever.
A late round of holiday buying sent tech and blue-chip stocks soaring as bargain-hunting investors capitalized on the massive sell-offs earlier this week. But analysts cautioned against attributing the gains to anything more than seasonality and the market’s oversold condition.
“This is a bounce. The basic nuts and bolts of why we came down, the cooling economy and earnings warnings, haven’t gone away,” said Larry Wachtel, market analyst at Prudential Securities. “Just because we’re able to go up after more than a week on the downside for the Nasdaq doesn’t mean it’s a brave new world. It’s just the law of averages.”
“Typically the last week of the year tends to be a strong period, and with tech stocks having been devastated in the last two or three weeks, there’s a lot of bargain hunting going on,” said Peter Anderson, chief investment officer at American Express Financial.
Nasdaq, which touched a 21-month low Wednesday, jumped 7.6%, climbing 176.90 points to 2,517.02. It was the index’s fifth-biggest percentage gain ever and just out of the top 10 in terms of point gains. The boost couldn’t compensate for earlier sell-offs, however; the index fell 136.25 for the week, or 5.1%, and is down 38.2% for the year and 50.1% from its March 10 all-time high of 5,048.62.
The Dow Jones industrial average was up 148.27 points, or 1.4%, to 10,635.56, ending the week up 1.9%. The Dow is now off 7.5% year-to-date and 9.3% from its Jan. 14 high of 11,722.98.
The Standard & Poor’s 500 index climbed 31.09 points, or 2.4%, to 1,305.95. For the week, it was off 6.2, just under half a percent. The benchmark index is down 11.1% for the year and 14.5% from its March 24 high of 1,527.46.
Volume was strong--especially given that it was the last trading day before the three-day Christmas holiday weekend. About 2.2 billion shares changed hands on Nasdaq and more than 1 billion on the New York Stock Exchange. Winners outnumbered losers by 2-1 on both exchanges. The markets will be closed Monday for Christmas.
Tech stocks led the way. Computer and printer company Hewlett-Packard, a Dow component, rose $2.81 to $32.19. Microsoft also gained ground, up $3 at $46.44.
Non-tech gains were solid, buoyed by rises in financial issues. Banker J.P. Morgan rose 50 cents to $167.88 and Citigroup rose $1.31 to $50.06. Drugs and consumer staples, however, showed some weakness. Merck fell $2 to $90.50; Procter & Gamble was off 75 cents at $73.75.
Ford fell $1.38 to $22.81 after warning that soft demand would affect its sales and results.
Earnings worries have dogged the market since Labor Day, but those concerns have intensified in recent weeks because of new reports suggesting the economy is quickly slowing.
The market plunged Tuesday and Wednesday, rattled by earnings worries and the realization that the Federal Reserve would not cut interest rates before the holidays.
Some analysts attributed Friday’s rally more to the absence of any new earnings warnings than to any specifically positive sentiment. They noted that the Nasdaq has had daily gains of 5% or more 14 times since March 10, and each time the rally has proved fleeting.
“There are a lot of people that are saying, ‘Is this the one that’s going to stick?’ ” said Robert Leshman, who manages the Briar Partners hedge fund.
On a more hopeful note, some noted that this week may have seen the final spasm of tax-loss selling, the practice of dumping losing stock positions before the end of the year so the losses can be claimed on 2000 tax returns.
Among Friday’s market highlights:
* Internet stocks rose from the dead--for the moment, at least. TheStreet.com Internet Sector index rose 12.5% as it bounced back from Thursday’s two-year low. Investors apparently believe many Internet-related stocks--some down as much as 98% from their highs--fully reflect the bad news afflicting the sector.
Among the gainers: Internet portal At Home rose $1.88 to $5.88; Ariba, which makes electronic commerce software, jumped $6.73 to $54.61; and online security firm Check Point Software rallied $25.63 to $142.94.
* Big Blue also was back. IBM surged $7.44 to $89 after falling 21% since Dec. 5 amid speculation that the company will join other large computer companies in reducing its profit or sales forecast.
Salomon Smith Barney analyst John Jones disputed that speculation, saying in a note to clients Friday that the main cause of other computer makers’ lowered forecasts--soft retail sales to individual customers--are only a small part of IBM’s business.
Market Roundup, C4-5
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On, Nasdaq!
Nasdaq woke up Friday--just in time for Christmas. Some analysts aren’t convinced the rally will outlast the holidays, however.
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Nasdaq composite index, daily closes and latest
Friday: 2,517.02, up 176.90
Source: Bloomberg News
