Stocks Post Broad but Modest Gains
Bargain hunting held sway over any remaining year-end tax-related selling on Thursday, as stocks rallied broadly in heavy trading.
Major indexes posted mostly modest gains, but the rally was a relief to traders who worried that many investors remained eager to dump losers in the next-to-last session of the year.
The Dow Jones industrials added 65.60 points, or 0.6%, to 10,868.76, while the Standard & Poor’s 500 crept up 0.4%.
In the beleaguered Nasdaq market, a midday sell-off was followed by a wave of buying near the close, lifting the tech-dominated composite index 18.41 points, or 0.7%, to 2,557.76 by the end of trading.
While blue chips have fared well in recent sessions, small and mid-sized stocks were favorite targets of buyers on Thursday: The S&P; small-cap index surged 3% for the day and the S&P; mid-cap index jumped 2.1%.
Winners topped losers by 21 to 8 on the New York Stock Exchange and by 26 to 15 on Nasdaq.
Traders said some money managers were clearly engaged in window dressing, a practice of buying stocks that have performed well recently, so that clients see those names on year-end statements.
Many drug, bank, insurance and defense stocks were winners Thursday. Those sectors have led the market in recent months.
Among drug shares, Merck rose $2.06 to $94.75, Pharmacia rose 94 cents to $60.94 and Johnson & Johnson gained $1.75 to $104.75. The S&P; drug index is up 37% this year.
HMO stocks also were hot. Cigna rose $2.30 to $135 and Wellpoint Health gained $3.81 to $117.75.
In the insurance sector, Safeco rose $1.75 to $35.69, Jefferson Pilot added $1.75 to $75.44 and Torchmark rose $1.25 to $38.50.
Among defense issues, General Dynamics gained $1.63 to $76.81 and Lockheed Martin added 99 cents to $34.25.
But some bargain hunting was evident in the tech sector as well--or at least some “short covering” by traders who had bet certain stocks would continue to fall. Short sellers may have rushed into some tech names to close out their bearish bets as the stocks suddenly jumped.
Tech winners included Tibco Software, up $4.88 to $53.38; Juniper Networks, up $10.56 to $138.63; and Commerce One, up $2.50 to $27.94.
Still, plenty of tech stocks ended lower. Intel fell $1.63 to $30.94, Sun Microsystems lost $1.44 to $28.94 and Efficient Networks slid $2.06 to $13.75.
Both the stock and bond markets seemed to shrug off the latest downbeat economic reports, including one showing a decline in consumer confidence. Longer-term Treasury yields ended little changed.
In other markets, energy prices slid, while the dollar gained against the euro.
The gains in small and mid-cap stocks Thursday suggested many investors are betting on the “January effect”--a rally in smaller shares at the start of the year.
But mid-cap stocks also just were padding their gains, analysts noted: Enthusiasm for mid-sized companies has lifted the S&P; mid-cap stock index 18.4% this year.
By contrast, the blue-chip S&P; 500 is down 9.2% for the year and the Dow is off 5.5%.
The losses in major indexes so far put them on track to record their worst calendar year since the mid-1970s or early 1980s.
The Dow’s loss so far is its worst since 1981, when it fell 9.2%. The S&P; 500’s loss also is the worst since 1981, when it fell 9.7%.
Some analysts hold out hope for a big turnaround in January.
“Once we get into January, we might have a whole change of character in the market,” said Ricky Harrington, analyst at Wachovia Securities. “You have a very good chance of a very rigorous technical rebound in so many of these battered stocks.”
Market Roundup: C7-8
