Nasdaq, Dow Up as Bottom May Be Near
An unnerving week on Wall Street ended on a positive note Friday as investors snapped up shares at bargain prices on a bet that the market’s bottom may be near after days of relentless pummeling.
“Eventually you just say these things are just too cheap to sell,” said James Crawford, a portfolio manager at Trevor Stewart Burton & Jacobsen. “We could be looking at a half-decent rally [in the near term]. Maybe not back to the old highs, but at least back to something you could make a little money on.”
Investors took courage from a last-minute buying spree Thursday that catapulted technology stocks higher and rescued the blue-chip Dow Jones industrial average from closing in a bear market--defined as down 20% from its high--for the first time in more than a decade.
Technology stocks, which led the market down this year amid growing worries about slowing economic and corporate profits, led the rebound.
On Friday, the Nasdaq composite index climbed 30.98 points, or 1.6%, to close at 1,928.68. The tech-laden index rose 2% for the week, snapping a seven-week losing streak--its first since 1980. It’s still off 61.8% from its peak.
The Dow climbed 115.30 points, or 1.2%, to 9,504.78, bolstered by gains in its technology and financial services components. However, the Dow fell for the second week in a row, down 3.2%, and is off 18.9% from its all-time high.
The Standard & Poor’s 500 index rose 22.25 points, or 2%, to 1,139.83. It was off 0.9% for the week and is still in a bear market, down 25.6% from its peak.
The rally was broadly based. Advancing issues outnumbered decliners by 2 to 1 on both Nasdaq and the New York Stock Exchange. Trading was active.
“People are encouraged by the big turnaround [Thursday] toward the end of the day, and there is some more follow-through [Friday], especially in technology,” said Guy Truicko, a portfolio manager at Unity Management. “People are hoping the worst is behind us, and perhaps we have reached a bottom.”
Investors have begun to speculate that the market could be ready for a recovery after months of erosion that has driven the Nasdaq and the broad S&P; 500 indexes into bear territory.
“There probably are some longer-term investors who are saying, ‘I will put something to work here,’ ” said Paul Cherney, analyst at S&P; Marketscope.
The unusually heavy volume of trading behind Thursday’s rally--the third-busiest day ever on the NYSE--heightened speculation that the market may have reached a bottom. Higher-than-usual volume is a sign of final climactic selling, when most investors give up all hope for a recovery any time soon. For professional money managers, that means cooler heads will soon prevail.
The recent heavy selling on Wall Street became a frenzy this week after the Federal Reserve lowered interest rates by half a percentage point, disappointing investors hoping for more.
Technology stocks were in the spotlight Friday as they built on the prior day’s gains. IBM climbed $4.41 to $93.51, and Hewlett-Packard gained 28 cents to $31.17. Microsoft also lifted the blue-chip index with a gain of $2.56 to $56.56.
Financial services stocks, such as Citigroup, up $2.25 at $42.85, and American Express, up $2.10 at $36.80, bolstered the Dow.
Red Hat, which provides an alternative to Microsoft’s Windows operating system, edged up 66 cents at $5.88 after beating earnings estimates as revenue more than doubled.
It seemed that nothing could dampen the Street’s optimism, even news that Motorola, the world’s No. 2 mobile-phone maker, said the slowing economy would force it to slash an additional 4,000 jobs, bringing its job cuts since December to 22,000. Motorola climbed 31 cents to $15.99.
Semiconductor shares were also building on Thursday’s blockbuster performance. Top computer chip company Intel edged up 13 cents to $28.81, and the Philadelphia Stock Exchange’s semiconductor index strolled 2.5% higher.
Some tech-sector names failed to build on Thursday’s gains, however. Chip maker Broadcom lost $3.75 to $34.13 after rising $6.25 on Thursday, and JDS Uniphase, which makes fiber-optic components, fell $2.14 to $23.19 after gaining $3 on Thursday. And networking giant Cisco Systems fell $1.06 to a 52-week low of $18.69 after analysts cut profit estimates for the company.
Also down was biotech company Immunex Corp., whose shares plummeted $7.25 to $11.63 after it halted tests of its successful arthritis drug Enbrel in chronic heart-failure patients because the drug did not prove effective.
Despite Immunex’s debacle, the Amex biotech index, which is off 30% this year, rose 4% on Friday. Among the big gainers: Genentech, up $3.70 to $47.45, and Protein Design Labs, up $4.44 to $39.19.
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Good Friday--Finally
The S&P; 500 ended every week this year on a down note until Friday, when it closed up 22.25 points at 1,139.83.
Standard & Poor’s 500 index, Friday changes
Friday: +22.25 pts.
Source: Bloomberg News
