Super Wednesday? Good Enough, Say Longs, as Major Indices Rise

SAN FRANCISCO -- In the wake of yesterday's big market losses and George W. Bush's big victory in the primaries, conservatism was in vogue today as traders voted for blue-chips. But there was compassion for the Nasdaq Composite Index, too, as the tech proxy recovered from some steep midmorning losses to close modestly higher.

Major Indices INDEX CHANGE % VALUE YR TO DATE Dow 60.50 +0.6% 9856.53 -14.3% S&P 500 11.10 +0.8% 1366.53 -6.9% Nasdaq 49.55 +1% 4897.39 +20.3% Russell 2000 0.79 -0.1% 594.68 +17.8% TSC Internet 38.71 +3.1% 1288.01 +11.6% NOTE CHANGE PRICE YIELD 10-Year Treasury 1/32 100 28/32 6.381%

The action was embodied by drug stocks, which rose from a pronounced slump as investors went searching for value. Leading the way were Bristol-Myers Squibb (BMY Quote), up 10.1%, and Schering-Plough (SGP Quote), higher by 10.9%; PaineWebber upped recommendations on each. The American Stock Exchange Pharmaceutical Index rose 5.9%.

Meanwhile, investors were encouraged as crude prices declined 8.9% to $31.10 a barrel after OPEC hinted higher production is forthcoming.

"Oil coming down psychologically helps because it could make the Fed less aggressive," said Robert Harrington, co-head of block trading at PaineWebber. "Some people are looking at some old-economy stocks that got oversold short-term. We're seeing a decent bounce-back rally, but will have to see if it follows through."

Follow-through was a problem for blue-chips even today. After rising as high as 9918.89 behind strength in drugmakers Merck (MRK Quote) and Johnson & Johnson (JNJ Quote), the Dow Jones Industrial Average closed up 60.50, or 0.6%, to 9856.53.

Harrington predicted the index will continue to be volatile as it "tries to find a base around this level from which maybe it can work higher later in the year."

The Dow was restrained by weakness in American Express (AXP Quote) and Hewlett-Packard (HWP Quote). Also, Procter & Gamble (PG Quote) fell a further 5.1% after yesterday's debacle.

IBM (IBM Quote) was a positive influence on the Dow, rising 2.8% on news of its alliance with Ariba (ARBA Quote) and i2 (ITWO Quote).

Ariba rose 2% and i2 gained 12.4%, holding the high-tech fort against marauding sellers until the rest of the tech cavalry appeared after lunchtime.

From its intraday low of 4722.14 at around 11 a.m. EST, the Nasdaq rose steadily and inexorably until about 3:30 p.m. before closing up 49.55, or 1%, to 4897.39.

Gotta Have Faith

Even at the Nasdaq's nadir, few market players believed the action suggested blue-chips would revive at the expense of tech names for long.

Charles Payne, chief analyst at Wall Street Strategies, recalled that the last time the Dow dipped below 10,000, the Nasdaq took a bit of a powder before storming back in earnest.

"You saw some bargain-hunters coming out with drugs the biggest beneficiaries. But I don't think the game has changed," Payne said. "In a couple of days more of the buying and cash flow will be redirected back into the Nasdaq."

That desire reasserted itself today. Gains by bellwethers such as Microsoft (MSFT Quote) and MCI WorldCom (WCOM Quote) helped the Comp overcome weakness in tech stalwarts such as JDS Uniphase (JDSU Quote) and Ciena (CIEN Quote). The Nasdaq 100 rose 1.3%.

Yesterday's dichotomy between P&G and Network Solutions (NSOL Quote) is the "snapshot that told the story" of why investors just can't stay away from the Comp, Payne said. "The reality is, I can find value all day long [on the Big Board] but people want instant gratification. They want to make money."

PaineWebber's Harrington agreed, noting the 10.9% rise for Oracle (ORCL Quote), which announced a business-to-business marketing alliance with Chevron (CHV Quote).

"That kind of momentum is still going to continue," the trader said. "That's where the action is going to be."

Chip and chip-equipment makers such as E-Tek Dynamics (ETEK Quote) and KLA-Tencor (KLAC Quote) took a break from their recent momentum, however. The Philadelphia Stock Exchange Semiconductor Index fell 1.7%.

Internet favorites such as Yahoo! (YHOO Quote) fared better, helping TheStreet.com Internet Sector index rise 38.71, or 3.1%, to 1288.01.

In IPO action, Crayfish (CRFH Quote), the Japanese email service, rose 414% on its first day of trading.

The S&P 500 rose 11.10, or 0.8%, to 1366.72, aided by recently punk groups such as drug makers, transports and retailers but restrained by large-cap tech names and financials.

The Russell 2000, meanwhile, declined 0.79, or 0.1%, to 594.68 amid negative market internals and as biotech stocks paused from their recent upturn. The American Stock Exchange Biotech Index fell 5.5% thanks to losses by names such as ImClone (IMCL Quote), which fell 9.9%.

Additionally, oil service stocks got hit by the declining crude prices. Donaldson Lufkin & Jenrette cut its recommendations on the group, sending Halliburton (HAL Quote), Santa Fe International (SDC Quote) and Transocean Offshore (RIG Quote) down more than 10% apiece. The Philadelphia Stock Exchange Oil Service Index shed 8.9%.

In New York Stock Exchange trading, 1.199 billion shares were exchanged while declining stocks led advancers 1,535 to 1,429. In Nasdaq Stock Market action 1.983 billion shares traded while losers led 2,365 to 1,895. New 52-week lows bested new highs 250 to 50 on the Big Board while new highs led new lows 198 to 164 in over-the-counter trading.

Among other indices, the Dow Jones Transportation Average rose 88.94, or 3.9%, to 2352.53; the Dow Jones Utility Average shed 3.52, or 1.3%, to 276.47; and the American Stock Exchange Composite Index lost 15.54, or 1.5%, to 1001.40.

The price of the 10-year Treasury note fell 1/32 to 100 28/32, yielding 6.38%.

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