Today's Market: Nasdaq Bounces Strongly but Dell Could Bring New Test

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It had to happen eventually. Investors, recalling the commercials of Eddie Antar, declared current stock prices insane and gave a lift to the major averages today, giving some respite to the market's mounting gloom over the economic picture. Capital goods, cyclicals and technology stocks led the way in a heavily traded session.

Investors bought into a market that was reeling after yesterday's Federal Reserve meeting. The monetary policy committee maintained that the balance of risks in the economy continue to tilt toward higher inflation, and that disrupted a stock market hoping for friendlier words from the Fed.

Major Indices INDEX CHANGE % VALUE YR TO DATE Dow 64.74 0.60% 10,784.48 -6.2% S&P 500 7.86 0.55% 1434.32 -2.4% Nasdaq 67.27 1.95% 3523.10 -13.4% Russell 2000 2.82 0.56% 507.49 0.5% TSC Internet 15.32 2.40% 654.39 -43.3% NOTE CHANGE PRICE YIELD 10-Year Treasury 7/32 98 30/32 5.890% Market data as of: 5:18 PM ET, Wed Oct 4 2000

Today's rebound in technology stocks indicates to some that money managers were overzealous in taking the Nasdaq Composite Index to its lowest intraday levels since late May. The Nasdaq fell as low as 3382.53 today, having been under constant pressure during the last few weeks as investors faced numerous earnings warnings from companies ranging from Intel (INTC) to Apple (AAPL) and now Dell (DELL).

However, with earnings reporting season arriving, investors are heartened by the knowledge that the percentage of preannouncements that were negative still falls short of the historical average; the large number of companies that have kept their mouths shut are expected to report strong numbers for the third quarter.

Through the early afternoon, though, this was another dispiriting session, with technology stocks led by significant losses in Oracle (ORCL) and EMC (EMC). Non-tech blue chips held in reasonably well, and around midafternoon the tech sector perked up, as investors responded positively to the breach of the 3400 level in the Nasdaq Composite Index , identified as a technical support level. Levels defined as technical support are spots where buying is expected.

"I was really happy we held 3400," said Charles Payne, president and chief analyst at Wall Street Strategies. "A rotation based on fundamentals is one thing, but based on fear, it's another."

Oracle still finished down $1.50 to $68, but the stock was down $9 at one point, after losing $9.25 the previous day. The stock was the Nasdaq Stock Market's most active, with 100 million shares changing hands. Save for analyst actions, prompted in part by the stock's sharp Tuesday decline, there was little news on the stock. The company eventually issued a press release affirming its current strong outlook.

Microsoft (MSFT) hit another 52-week low, losing $1.13 to $55.44.

EMC, a software storage company that's been one of the market's new darlings of late, finished down $2.75 to $91.25 after the company's chairman filed to sell approximately 8% to 10% of his holdings, not exactly a show of confidence. The stock was the New York Stock Exchange's second-most actively traded today.

Meanwhile, other market darlings, such as fiber optics and telecommunications equipment companies, rebounded sharply today. JDS Uniphase (JDSU) gained $6.44 to $94.06 today, while SDL (SDLI) rose $20 to $310.94.

Semiconductor stocks, hit hard in recent weeks, were up sharply today; the Philadelphia Stock Exchange Semiconductor Index gained 6.2% today. The Philadelphia Stock Exchange Computer Box Maker Index rose 3.5% today.

Odds on a strong day tomorrow at first blush are looking long. PC maker Dell, one of the big-cap tech bellwethers, issued an earnings warning, saying weak European demand could shave a couple of cents off fourth-quarter profits. Right now, today's Nasdaq action looks like a rebound off support levels, rather than a shift in sentiment in terms of market valuation. The economic picture is still fuzzy -- strategists by and large expect a slowing in economic growth, and while investors feel the selling had gone too far, it's not clear whether the market can build on today's strength.

"I firmly believe the market has more downside risk," said Roseanne Lang, head of block trading at Cantor Fitzgerald. "It's a function of again being concerned with fundamentals and looking at valuations."

Cyclical stocks continued their strong gains. Dow component International Paper (IP) finished strong, gaining $1.88 to $31.50, and leading the Philadelphia Forest & Paper Products Index to a 2.8% gain. The S&P Chemical Index rose 1.6%.

Consumer cyclicals and capital goods names also rose strongly. Ford (F) gained 3% and Illinois Tool Works (ITW) rose 2.8%.

In the wake of today's strength in technology and capital goods companies, recent leaders like pharmaceuticals, financials and energy stocks were mostly weak today. The Philadelphia Stock Exchange/KBW Bank Index shed 1.9% today, and the Amex Pharmaceutical Index lost 1.2%.

Market Internals

Breadth was mixed on strong volume.

New York Stock Exchange : 1,254 advancers, 1,565 decliners, 1.2 million shares. 53 new 52-week highs, 77 new lows.

Nasdaq Stock Market : 1,874 advancers, 2,140 decliners, 2 billion shares. 35 new highs, 281 new lows.

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Most Active Stocks

NYSE Most Actives

• Lucent Technologies (LU): 23 million shares.

• EMC: 21.6 million shares.

• Xerox (XRX): 19 million shares.

Nasdaq Most Actives

• Oracle: 100 million shares.

• Microsoft (MSFT): 66.5 million shares.

• Intel (INTC): 61.8 million shares.

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Sector Watch

The Dow Jones Transportation Average advanced 2.5%, lifted by airline stocks for a second day in a row, which in turn boosted the American Stock Exchange Airline Index 2.4%. Delta(DAL) was adding about 12 points to the transport index's average.

The Morgan Stanley Cyclical Index rose 1.7%, while the Philadelphia Stock Exchange Forest & Paper Products Index jumped 2.8%. Shared components Georgia-Pacific(GP) and International Paper(IP) were both up.

Pick an energy sector, any energy sector -- they were all down, including the American Stock Exchange Natural Gas Index, off 2.2%, the Chicago Board Options Exchange Oil Index, down 2%, and the Philadelphia Stock Exchange Oil Service Index, 4.2% lower.

Telecommunications companies recovered from recent weakness. Lucent Technologies (LU) gained 7.7% in today's session, and chipmaker and cell phone company Motorola (MOT) rose 8.5% today. SBC Communications (SBC) gained 3.6%, and the Nasdaq Telecommunications Index gained 2.4%.

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Bonds/Economy

Treasuries ended lower on little news, as the focus shifted from yesterday's Federal Open Market Committee meeting to Friday's September employment report . In keeping with the Fed's aggressive stance on interest rates, short-maturity issues are faring worse than long-maturity ones. There are no major economic reports today.

In deciding to keep the fed funds rate at 6.5%, the Fed maintained their stance that the economy is still at risk of rising inflation, citing the high rate of labor-force utilization -- a.k.a., the low augmented unemployment rate -- as one of the major reasons. The September jobs report will measure that rate anew. In August it stood at 6.9%, just off its all-time low (since the Labor Department began measuring it in 1994) of 6.8% in June.

The benchmark 10-year Treasury note lately was down 8/32 at 98 29/32, lifting its yield to 5.895%.

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International

Investors dumped European stocks in a hurry today after yesterday's three-digit pullback on the Nasdaq intensified earnings worries there.

In London, the FTSE 100 lost 10.10 to 6334.90.

Across the channel, the CAC 40 in Paris fell 104.30 to 6296.13, while the Xetra Dax in Frankfurt dropped 38.83 to 6823.43.

The euro continued its downward spiral, lately down to 0.8744. TheStreet.com recently looked at what ails the euro .

Undaunted by Wall Street's uninspiring performance the day before, most of Asia's major markets posted solid gains Wednesday.

Japan's Nikkei 225 closed up 237.0, or 1.5%, to 16,149.1, shaking off early losses with help from both Old and New Economy shares.

In Tokyo currency trading, the dollar fell to 108.74 yen from 108.88 yen. The greenback was lately trading up to 109.35 yen.

Other Asian markets also had a good session Wednesday, as Hong Kong's Hang Seng index rose 152.9, or 1%, to 15,878.9, and South Korea's Kospi index overcame an early drop to close up 9.2 points, or 1.6%, to 598.4.

Taiwan's equity market was the region's one exception, however; the TWSE index plunged 145.5, or 2.4% to 5997.9, as the country's premier unexpectedly resigned.

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