Shares Stage Vigorous Rally, Interrupting a 7-Week Slide
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.
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.
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.
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:
* 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.
Market Roundup, C6-7