Late Buyers Curtail Steep Slide
Key stock indexes closed modestly higher Thursday as bargain hunters rushed into the market at midday, halting another steep slide in blue chips.
The turnaround, on very heavy trading volume, raised hopes that the market might be stabilizing. But analysts noted that those hopes have been dashed many times in recent months.
The Dow Jones industrial average was off as much as 208 points in early trading, after falling 565 points from Monday through Wednesday. But a flurry of buying in the final half of the session lifted the Dow to a close of 8,801.53, for a loss of 11.97 points on the day.
The Standard & Poor’s 500 index closed with a gain of 6.90 points, or 0.8%, at 927.37, while the Nasdaq composite rose 28.42 points, or 2.1%, to 1,374.43.
New York Stock Exchange trading volume was the sixth-busiest ever. Traders said some of the buying resulted from institutional computer-generated purchase programs triggered when key indexes hit certain lows.
Some analysts and money managers say stocks are becoming cheap by many measures, with the S&P; down 19.2% this year and Nasdaq down 29.5%, and with the economy recovering.
But the wave of corporate financial scandals hasn’t shown signs of abating, and that remains one of the biggest threats to share prices, experts say.
Indeed, drug giant Bristol-Myers Squibb said Thursday that its accounting is under investigation by the Securities and Exchange Commission. Bristol shares closed down $1.04 at $22.11, though they bounced from a low of $19.49.
“What the stock market needs more than anything is time and no more scandals,” said Brian Belski, market strategist at US Bancorp Piper Jaffray. “We have to get to the point where we say that the values are too good to ignore, and then this crisis in confidence goes away. We’re not there yet.”
The market got a lift Thursday after Barton Biggs, a well-known investment strategist at Morgan Stanley in New York, told clients in a memo that “this is no time to be selling stocks,” with prices depressed. Biggs, who has been largely bearish on the market in recent years, said that although he doesn’t expect a new bull market to be imminent, “I do think that investors can make money in the short run.”
Blue chips also were buoyed after Eastman Kodak said second-quarter earnings will be about 85 cents a share, excluding one-time items. Analysts had expected 63 cents, according to Thomson First Call. Kodak said its restructuring program is paying off sooner than expected.
Kodak, a Dow index component, jumped $2.94 to $29.58.
Technology investors were encouraged that the Nasdaq index performed better than the S&P; 500 for a third straight session. That could be an indication that the battered tech sector is bottoming, some said.
In the semiconductor sector, where the average stock is down 29% this year after falling 9% last year and 18% in 2000, “You’ve got valuations that are looking much more reasonable,” Mark Edelstone, Morgan Stanley’s chip-stock analyst, told Bloomberg News.
Intel jumped $1.44 to $18.25, Broadcom rose $1.71 to $18.77 and Micron Technology gained $1.07 to $22.35.
Falling stocks still outnumbered winners by 20 to 15 on Nasdaq and by 20 to 13 on the New York Stock Exchange.
Some experts said today’s trading could be a key test: If stocks can sustain Thursday’s turnaround the market’s bulls might get the upper hand, at least in the near term.
Many pros remain wary. In recent months, “The attitude on Main Street and Wall Street has changed from buying on the dips to selling on the rallies,” said Richard A. Dickson, a technical analyst at Hilliard Lyons in Louisville, Ky.
In other trading Thursday, the dollar continued to slide against the yen, falling to a nine-month low of 116.81 yen, from 117.62 Wednesday. The euro rose again, ending at 99.2 cents in New York, up from 98.9 cents.
The dollar’s continuing weakness suggests foreigners are selling U.S. stocks.
Among Thursday’s highlights:
* Beaten-down tech and telecom shares up sharply included Verizon Communications, up $1.50 to $37.60; KLA Tencor, up $3.28 to $43.81; and Agilent Technologies, up $1.46 to $23.55.
After regular trading ended, Dell Computer said its second-quarter earnings will beat expectations. That could boost tech issues today.
* Second-quarter earnings reports or forecasts moved stocks, including Hershey Foods, up $1.66 to $63.46, and Dow Jones, down $1.26 to $43.90. Yahoo rose 73 cents to $12.92 in the wake of its earnings report Wednesday and despite a downgrade by Merrill Lynch to “reduce/sell.”
* Most drug stocks rebounded despite the Bristol-Myers news. Merck rose 71 cents to $44.28 and Pfizer gained $1.57 to $32.60.
* Defense stocks were a weak spot. General Dynamics fell $4.66 to $98.60 and Northrop Grumman lost $3.19 to $113.92.
* European markets skidded again. The French market lost 4% and the German market sank 1.7%.
Market Roundup, C7-8
