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Shares Stage Vigorous Rally, Interrupting a 7-Week Slide

TIMES STAFF WRITER

Wall Street interrupted its seven-week slide with a badly needed rally Thursday as investors focused on several upbeat corporate earnings reports.

The market recovered strongly after a tumble in the first half-hour that prompted at least one Wall Street strategist to predict that stocks have hit their low point for the year.

The Dow Jones industrial average erased an early 88-point loss to climb 247.68 points, or 3.4%, to 7,533.95, bouncing from Wednesday’s five-year low. The tech-heavy Nasdaq composite index soared 49.26 points, or 4.4%, to 1,163.37, and the Standard & Poor’s 500 index rose 27.16 points, or 3.5%, to 803.92.

Treasury yields surged as investors piled into stocks.

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Still, investors weary of hearing that the 2 1/2-year-old bear market has hit bottom had plenty of reason to be skeptical. Though volume was heavy, winners topped losers by an unimpressive 10 to 7 on Nasdaq and 5 to 3 on the New York Stock Exchange.

But Rick Bensignor, technical strategist at Morgan Stanley in New York, said he believes the market has seen its low for 2002: “It may not be the low low--meaning the end of the bear market--but we could see at least a 20% rally from here, and after that only time will tell.”

Positive profit reports or forecasts from Aetna, Yahoo and others helped stoke the day’s move. Yahoo gained $2.29 to $12.27 after it reported better-than-expected third-quarter earnings after the market closed Wednesday. And Aetna rose $5.11 to $36.80 after saying--also late Wednesday--that its third-quarter profit would be double expectations.

But there was plenty of news to remind investors that robust earnings growth may not come until 2003 or later.

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The Labor Department reported that the number of Americans filing for unemployment benefits fell below 400,000 last week. But analysts noted that the four-week average--a more reliable gauge of economic health--remains above 400,000 and still suggests that the labor situation is deteriorating.

Also, U.S. retailers in September posted their smallest sales gains in a year, according to a report from the Bank of Tokyo-Mitsubishi. Sales at such merchants as Wal-Mart Stores, Target and Kohl’s were less than forecast, although many retailers rode the tide of the rising market. Wal-Mart gained 90 cents to $51.64 and Target added $1.08 to $27.83. Kohl’s, however, plunged $5 to $49.45.

Also, fast-food operator Yum Brands, owner of Irvine-based Taco Bell, fell $6.18 to $23.57 after reporting weak September sales at its KFC chain. The S&P; index of restaurant stocks fell 2.4%

More broadly, with war against Iraq still looming, many analysts are doubtful the market can sustain Thursday’s gains. Numerous rallies have turned into one- or two-day wonders this year. Including Thursday’s bounce, the Dow has notched eight one-day gains of at least 3% this year yet remains off 24.8% year-to-date.

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Regardless of problems, the market has a history of rallying late in the year, said Steve Colton, manager of the Phoenix-Oakhurst Growth & Income fund in Scotts Valley, Calif. Important lows often have been reached during October.

“I would not be selling stocks,” Colton said. “There’s a good chance you might miss a fourth-quarter rally.”

Safe-haven investments suffered as stocks rallied Thursday. The yield on the 10-year Treasury note rose to 3.66% from Wednesday’s close of 3.57%, while gold prices fell again, losing $3.10 to $316.50 an ounce in New York trading.

Among the highlights:

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* The Dow utility index, which plunged 9.6% on Wednesday, surged 8.2%. American Electric Power jumped $3.51 to $21.20 after saying it will discontinue speculative energy trading, and Duke Energy rose $2.35 to $18.91.

* Other stocks that were moving on positive earnings news included data processor First Data, up $3.26 to $29.86; printer maker Lexmark International, up $6.30 to $51.40; and software maker Network Associates, up $2.16 to $10.76.

* European markets rallied, including a 5.2% jump in Germany and a 3.8% rise in France.

Bloomberg News was used in compiling this report.

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Market Roundup, C6-7


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