Dow Rebounds, Turning Terrible Day Into Merely Lousy One

Attention: The "Dow 10K" hats are still valid. The "Dow 10K" hats are still valid.

Major Indices INDEX CHANGE % VALUE YR TO DATE Dow -133.10 -1.30% 10,092.63 -12.2% S&P 500 -7.26 -0.53% 1353.43 -7.9% Nasdaq 67.26 1.48% 4617.59 +13.5% Russell 2000 4.13 0.75% 554.04 +9.8% TSC Internet 17.08 1.46% 1184.56 +2.6% TSC New Tech 30 15.29 +1.99% 782.11 +26.6% NOTE CHANGE PRICE YIELD 10-Year Treasury +13/32 100 31/32 6.367%

But at several times during the session, the hats tossed around last spring when the Dow first crossed 10,000 lost their meaning, as the Dow Jones Industrial Average fell below 10,000. The level is seen by many as a key psychological mark for the gauge.

After a turbulent day, in the end, the Dow ended sharply lower, while the Nasdaq Composite Index managed to rally and close at an all-time high.

Most times today, the Dow quickly managed to bounce back above 10,000 once it breached the level. The exception was in the afternoon, when the Dow spent about a half-hour under 10,000. Beginning around 2:45 p.m. EST, the Dow rallied and rose well above 10,000 but remained decidedly lower on the day.

The Dow shed 133.10, or 1.3%, to 10,092.63, after trading as low as 9942.78 intraday. It's now down 13.9% from its Jan. 14 closing high of 11,722.98. The Dow hasn't closed below 10,000 since April 6, 1999, when it settled at 9963.49.

American Express (AXP Quote) dragged the Dow down most today, losing 5.9%. Meanwhile, one of the stocks helping in the Dow's recovery this afternoon from the lows was General Electric (GE Quote), which had been a big loser during the session. It managed to rebound and closed up 1/2 to 131, having traded as low as 126 1/16 intraday.

While a lot of attention went to the Dow, the Nasdaq Comp and the Russell 2000 both managed to post a day in the plus column. The S&P 500 ended in the red.

The Nasdaq Comp rose 67.26, or 1.5%, to 4617.59. Semiconductor stocks, which are having a stellar year so far, provided some aid to the Comp's cause: The Philadelphia Stock Exchange Semiconductor Index surged 5.6%. A bullish report on the sector out of PaineWebber aided the group's cause. Also helping out was a pop in shares of Intel (INTC Quote), a member of the Comp, the S&P 500 and the Dow. It rose almost 5% to 114 1/4, after Robertson Stephens analyst Daniel Niles raised his earnings estimates and price target on the chip titan. He raised his price target on Intel to 150 from 125. Intel was the biggest positive influence on the Dow.

Elsewhere, the S&P 500 fell 7.26, or 0.5%, to 1353.43. The Russell 2000 rose 4.13, or 0.8%, to 554.04.

TheStreet.com Internet Sector index rallied 17.08, or 1.5%, to 1184.56. The DOT rose as high as the 1190.67 level, and fell as low as 1140.97 intraday.

TheStreet.com New Tech 30 rose 15.29, or 2%, to 782.11. The TSC New Tech 30, unveiled Jan. 5, is a market-cap-weighted index focused on tracking the most scorching part of the market, the magnet for Wall Street's hot money. A list of the index components is available at http://www.thestreet.com/newtech/.

New Economy Trumping Old

Jay Suskind, head of institutional equity trading at Ryan Beck, said the story again today was the so-called "new economy" stocks doing well while the "old economy" stocks are suffering. Suskind said the thinking lately has been that the old-economy stocks are affected by interest rates and the economic cycle, for example, while the new-economy stocks are immune to those factors.

Dow 10,000 doesn't mean much from a technical standpoint, Suskind said, but he added that it is important psychologically. "It makes for splashy news headlines," he said.

Sector-wise, consumer, chemical, paper, oil producer and retail stocks suffered a pounding. The Morgan Stanley Consumer Index fell 2.1%. The S&P Chemicals Index gave up 2.2%. The Philadelphia Stock Exchange Forest & Paper Products Index said goodbye to 2.6%.

Traders buried biotechnology stocks for a portion of the day before the group rebounded. The Nasdaq Biotechnology Index rose 0.2%.

'A Huge Binge of Speculation'

Philip Roth, chief technical analyst at Morgan Stanley Dean Witter, pointed out that the market is still in a "huge binge of speculation." He added that those periods don't end pleasantly.

After 10,000, the Dow's next support is at 9000, Roth said. He doesn't expect the overall market to broaden out in a sustained move until the market's leaders -- technology, telecom and biotech -- correct.

Roth pointed out that the oil service stocks were very strong today, noting that they're "finally responding" to higher crude oil prices. He said there's a lot more upside in the group. He thinks they could rise 20% to 30% over the medium term.

Treasuries were mixed. The 10-year note was up 13/32 to 100 31/32, yielding 6.37%. The 30-year Treasury bond was down 8/32 to 101 14/32, putting its yield at 6.14%. (For more on the fixed-income market, see today's Bond Focus.)

In New York Stock Exchange trading, 1.176 billion shares were exchanged while declining stocks beat advancers 1,995 to 1,037. In Nasdaq Stock Market action 1.942 billion shares traded while losers defeated winners 2,307 to 1,849. New 52-week lows beat new highs 344 to 48 on the NYSE while new highs beat new lows 272 to 151 in over-the-counter trading.

Among other indices, the Dow Jones Utility Average crumbled 7.99, or 2.7%, to 285.53; the Dow Jones Transportation Average fell 39.98, or 1.7%, to 2380.30; while the American Stock Exchange Composite Index rose fractionally to close at 935.62.

SEC Welcomes New Exchange to the Fray

The Securities and Exchange Commission today approved the International Securities Exchange's application to become a registered exchange.

The ISE is the first exchange to register with the commission since the Chicago Board Options Exchange in 1973.

The ISE is a fully electronic exchange for trading options on U.S. equity securities, combining screen-based trading with the traditional "open-outcry" auction market. It will not have a physical trading floor like other options exchanges. Ultimately, the ISE intends to trade 600 of the most active options classes, but it will trade just 30 at first.

ISE already has had a positive impact on the options market, the SEC said in a statement. Since ISE filed its application with the commission on Feb. 2, 1999, the U.S. options exchanges have begun to multiply list the most active options classes, reducing spreads by between 15% and 42%. Moreover, transaction fees on the options exchanges have been reduced during the past year.

The ISE's planned launch of March 24 has been postponed until May 26.

Self Regulation

The ISE becomes a self-regulatory organization. First, the ISE intends to conduct its own surveillance of trading on its market.

In addition, the ISE intends to enter into regulatory allocation agreements with NASD Regulation and with the other options exchanges.

Under these allocation agreements, another SRO will take responsibility for ensuring that firms that are members of both that SRO and the ISE comply with common rules.

The ISE will contract on a payment for services basis with NASD Regulation to perform certain regulatory functions that are not covered by the above agreement. Although the ISE is now a registered exchange, before it can begin trading it must become a member of the Options Clearing Corp. and join the organization responsible for consolidation and dissemination of options market quotations -- OPRA.

Options Linkage

The ISE will participate in the options market linkage along with the nation's four other options exchanges. Also on Thursday, the SEC published a notice requesting public comment on three intermarket linkage plans filed by the options exchanges. The ISE submitted a plan identical to that filed by the American Stock Exchange and the CBOE.

-- Erin Arvedlund

---

For coverage of today's top stocks in the news, see the Company Report, published separately.