Market Rebounds From a Sell-Off
Blue-chip stocks posted modest gains Monday after bargain hunters pulled the market out of a sell-off caused by fears of poor corporate earnings and jitters about spreading anthrax cases.
The session was a mild retreat from the more enthusiastic trading seen last week. Although most third-quarter results coming out this week and next are expected to be dismal because of the economy’s problems and the Sept. 11 terrorist attacks, analysts say investors are concerned about what companies have to say about the future.
Investors refrained from making big decisions Monday, leaving the market’s major indexes little changed as they awaited bigger earnings reports due later in the week.
The Dow Jones industrial average saw a slim gain, up 3.46 points, or 0.04%, at 9,347.62, in the final minutes of trading. For much of the session, the Dow was down, falling as much as 105 points.
The broader market posted slight losses. The Nasdaq composite index fell 7.09 points, or 0.4%, to 1,696.31 after dropping 39 points earlier. The Standard & Poor’s 500 index slipped 1.67 points, or 0.2%, to 1,089.98, regaining most of a 13-point loss.
Trading was lighter than normal on the New York Stock Exchange, and declining issues barely outnumbered advancers 15 to 14.
Analysts said the downturn wasn’t surprising, and even could have been larger, given the anticipation of earnings and the market’s strides since the terrorist attacks.
Last week, the Dow gained 2.5%, the Nasdaq climbed 6.1% and the S&P; 500 gained 1.9%.
“It’s earnings....Traders tend to not hold positions in advance of wild cards,” said A.C. Moore, chief investment strategist for Dunvegan Associates in Santa Barbara. “And there are earnings this week that are important to the market: Intel, IBM, AOL Time Warner and Nokia.”
There also is continued unease about the course of U.S. military action in Afghanistan and the threat of further terrorist attacks--the latter brought vividly home in recent days by the spate of anthrax infections and false alarms.
“Uncertainty still overhangs the market,” said Charles White, president of investment firm Avatar Associates. “You have got a lot of evidence that tells you that in six or nine months, stocks should be higher. But there are a lot of things that could happen between now and then that could upset the apple cart.”
The United States took its military campaign in Afghanistan into a second week to force the ruling Taliban to hand over Osama bin Laden. U.S. Senate Majority Leader Tom Daschle (D-S.D.) received a letter containing a powder that tested positive for anthrax, U.S. Capitol Hill police said, spurring more fears about a biological assault.
Companies that could help combat a chemical or biological attack continued their recent gains.
But the tech sector was weakened by analysts’ downgrades. J.P. Morgan cut its rating on communication chip stocks, including Altera, which fell $2.69 to $20.46. Lehman Bros. downgraded chip-equipment makers, including Applied Materials, which lost $1.40 to $33.64.
Investors bid Intel down 62 cents to $24.38 on concerns that the battered semiconductor sector still hasn’t bottomed. But IBM rose $1.16 to $102 after UBS Warburg reiterated its “strong buy” rating on the stock, calling it a good defensive buy.
Both Dow industrials members Intel and IBM were scheduled to report earnings today.
Earnings were key in trading outside of the tech sector, as well. Dutch financial services company ING Groep slid $3.80, or 13.5%, to $24.46 after slashing its 2001 profit forecast. Xerox stumbled 32 cents to $7.77 on a third-quarter profit warning.
But Bank of America rose $2.54 to $55.55 after beating analysts’ earnings estimates. Mortgage lender Fannie Mae, which also surpassed expectations, gained $1.52 to $78.95.
