An Up Day Ends Worst Quarter for Stocks Since ’87
Stocks ended their worst quarter in 14 years on a positive note Friday as better-than-expected economic data boosted optimism and investors bought shares battered by the previous week’s rout.
For the blue-chip Dow Jones industrial average, Friday’s rise capped the first weekly advance after four weeks of declines and marked the index’s biggest weekly percentage gain since 1984.
“Most investors believe this is as close to the bottom as they’re going to see,” said Erick Maronak, research strategist for NewBridge Partners. “A few more negatives came out of [the recent terrorist attacks], but . . . you can see there are economic and financial positives--we’ve had rate cuts and energy prices are down.”
But the week’s rebound couldn’t salvage a quarter that saw the Dow tumble 15.8%, its worst quarterly performance since the fourth period of 1987, which included the Black Monday market crash. The technology-laden Nasdaq composite fared even worse, losing 30.7% in the quarter.
For the day, the Dow closed up 166.14 points, or 1.9%, at 8,847.56, extending a 114-point advance on Thursday. The index was up 7.4% for the week.
Nasdaq rose 38.09 points, or 2.6%, to 1,498.80 Friday, and 5.3% for the week. The Standard & Poor’s 500 index rose 2.2% for the day and 7.8% for the week.
The Dow has recouped 44% of the 1,370 points it lost in the week ended Sept. 21, when trading resumed after the Sept. 11 attacks. Nasdaq has recovered about one quarter of its loss.
Still, analysts cautioned that the market might test its recent lows again. Stocks are trying to stabilize after the shock of the attacks, but the extent of the economic fallout from the tragedies remains unknown. Also, any U.S. military response is a wild card for an already skittish market.
The Federal Reserve already has cut interest rates once since the attacks--its eighth cut of the year--and is widely expected to reduce rates again when it meets Tuesday.
“It’s very much of a psychological battle in investing right now,” said John Forelli, portfolio manager for John Hancock Core Value Fund. “We don’t know if there are going to be more terrorist attacks and, if companies do fall short of expectations when they start reporting earnings, if stocks will still go down” again.
Financial stocks surged Friday, lifted by gains in American Express, up $1.60 at $29.06, and Merrill Lynch, up $2.79 to $40.60.
Even Bank of New York was higher, rising $1.68 to $35, despite its warning it will miss third-quarter earnings targets because of the attacks.
Tech and retail stocks also showed strength. Home Depot gained $1.47 to $38.37, and IBM advanced $2.30 to $92.30.
Boeing fell 90 cents to $33.50 on ongoing worries the aircraft manufacturer will be hurt by Americans’ fear of flying in the aftermath of the terrorist attacks. But many airline stocks continued to rebound.
Also Friday, the Commerce Department said revised data show the economy grew at a rate of 0.3% in the April-June quarter, higher than the 0.2% previously reported. Investors had little reaction because the report concerned last spring, rather than the present.
But better-than-expected September reports on Midwest manufacturing and consumer confidence helped boost stock buying.
Advancing issues led decliners more than 3 to 1 on the New York Stock Exchange and by more than 2 to 1 on Nasdaq. Trading was active, although still declining steadily from last week’s record levels.
European stocks surged, wrapping up their strongest one-week performance since 1975. Germany’s DAX index advanced nearly 3% on Friday, Britain’s FTSE 100 rose 2.9% and France’s CAC-40 climbed 1.6%.
In the U.S. Treasury bond market yields edged up. They have plummeted in recent weeks. The yield on the 10-year T-note ended at 4.59%, up from 4.55% on Thursday but down from 5.41% at the end of the second quarter.
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Market Roundup, C4, C5
