Hoping for an End to the Summer Slide

Investors worldwide will be watching closely this week to see if the U.S. stock market has finally halted its summer slide.

The turnaround Wednesday in U.S. blue-chip indexes and the dollar’s newfound strength suggest to some analysts that share prices have hit at least a near-term bottom.

“A lot of the negativity is out of the way and we’re seeing very good earnings reports” from many companies, said James Luke, fund manager at BB&T; Asset Management, which oversees $10 billion. “We’re due for a bounce.”

The Dow Jones industrials gained a net 3.1% last week, closing Friday at 8,264.39, mostly thanks to the surge of almost 500 points Wednesday in record trading volume on the New York Stock Exchange.

The Standard & Poor’s 500 inched up 0.6% for the week, to 852.84. But the battered technology sector remained the market’s weakest spot: The tech-dominated Nasdaq composite fell 4.3% for the week, to close at 1,262.12.

Year to date, the Dow is down 17.5%, the S&P; 500 is down 25.7% and Nasdaq is off 35.3%.

Besides the midweek turnaround in blue chips, the surprise last week was the dollar’s rally against the euro and the yen. That could indicate that global investment funds are beginning to favor U.S. stocks, with prices near five-year lows.

By Friday, the euro had fallen to 98.8 cents. It had traded above $1.01 in recent weeks.

A sharp drop in the price of gold last week also could indicate that investor fear levels are beginning to recede, experts said. Gold ended last week at $303.40 an ounce, its lowest since April.

But some analysts cautioned that the rebound in U.S. stocks and in the dollar could amount to little more than a temporary lull in the selling that has hammered Wall Street for the last 10 weeks.

“We were way due for a bounce but the fundamentals haven’t changed,” said Matthew Johnston, managing director of trading at brokerage Lehman Bros. in New York. “We’re still dealing with terrorism, accounting issues and [economic] fundamentals ... which appear to be showing signs of deterioration.”

Also, though second-quarter earnings reports from many companies have been strong, analysts are concerned that profit momentum will slow again in the second half of the year.