Modest Rally Ends Losing Streak
Stocks halted a five-day losing streak with a modest rally Wednesday as small-company issues led the way.
In other trading, the euro fell sharply against the dollar, fueled in part by the German chancellor’s suggestion that the European Central Bank should consider cutting interest rates.
Gold tumbled to a three-month low as the dollar rose.
On Wall Street, the Dow Jones industrial average inched up 35.25 points, or 0.3%, to 10,601.62, after losing nearly 149 points, or 1.4%, in the previous five sessions.
The Standard & Poor’s 500 index added 4.58 points, or 0.4%, to 1,143.67, while the Nasdaq composite index rose 17.54 points, or 0.9%, to 2,022.98.
The S&P; 600 index of smaller stocks jumped 3.21 points, or 1.2%, to 280.32.
Technology shares and smaller issues had borne the brunt of the recent selling in the market. The tech-dominated Nasdaq had fallen 3.6% in the previous five sessions; the S&P; 600 lost 3.7% from its record high Feb. 11 through Monday.
Despite the upturn Wednesday, volume was relatively muted. Winners topped losers by 2 to 1 on the New York Stock Exchange but by a smaller ratio on Nasdaq.
February has copied January’s pattern in the market: There was a rally at mid-month, then buyers ran out of gas.
“February is historically one of the weakest months of the year, and the last week of the month is the weakest week,” said Stephen Sachs, director of trading for Rydex Investments.
Strong fourth-quarter corporate earnings reports helped to stoke the market for much of the last two months. But now earnings season is winding down and “a lot of the positive news is already reflected in share prices,” Michael Sheldon, chief market strategist at New York-based securities firm Spencer Clarke, told Bloomberg News.
Still, most major market indexes remain positive year to date. The Dow is up 1.4%, Nasdaq is up 1% and the S&P; small-stock index is up 3.7%.
Wall Street didn’t show much reaction to Federal Reserve Chairman Alan Greenspan’s testimony before a House committee, where he said the economy is in a “more vigorous expansion.”
More currency traders turned optimistic on the value of the battered dollar and bearish on the euro: The latter sank to $1.25 from $1.269 on Tuesday after German Chancellor Gerhard Schroeder threw his weight behind calls for the European Central Bank to ease credit.
“The dollar weakness and resulting euro strength is causing problems with our exports,” Schroeder said in a TV interview. The ECB “should deal with that most intensively,” he said.
A cut in the ECB’s benchmark interest rate from the current 2% would erode the advantage euro-denominated financial assets have over the dollar. The Fed’s key rate is at 1%.
The euro hit a record high of $1.284 in mid-February.
As the dollar rallied gold slumped. Near-term futures fell $8.70 to $395.80 an ounce in New York, a three-month low. Gold benefited last year as an alternative to the weak dollar.
In the bond market, Treasury yields were little changed. The government sold $26 billion of two-year notes at a yield of 1.68%. Indirect bidders, which include foreign central banks, bought 45% of the notes, up from 42% at the January auction.
Among the day’s highlights:
* Tech shares rebounding included Ingram Micro, up $3.49 to $19.55 on its quarterly profit report; Teradyne, up $1.26 to $24.30; Adtran, up $1.55 to $31.61; and Intel, up 42 cents to $29.62.
* Retailers were mostly higher, led by Tiffany, which soared $2.36 to $39.48 after reporting strong quarterly earnings. Federated Department Stores jumped $1.59 to $52.54 on its earnings report.
* ITT Educational Services plunged $18.90 to $38.50. The technical-school operator said federal agents searched its corporate offices for records related to admissions and recruitment. Other education stocks also fell. Santa Ana-based Corinthian Colleges slid $1.82 to $58.76.
