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Dow Stages a Comeback, but Not Everyone Is Sold on It

Voices of dissent remain despite the market's reconquering Dow 10,000.

SAN FRANCISCO -- Blue-chips and technology stocks continued to move in opposite directions today. But this time, they moved not only in opposition to each other, but against recent patterns as well.

After trading as high as 10,156.54 around 3:00 p.m. EST, the

Dow Jones Industrial Average

closed up 176.53, or 1.8%, to 10,038.65.

That the Dow rebounded from last week's harsh selloff (which culminated with a sub-10,000 close

Friday encouraged some traders. But, that the index failed to sustain intraday gains and faded toward the close left others feeling the market is still vulnerable to more declines. Or, at least, that there's little to take away from today's action.

"We've got more work to do to prove this thing will sustain itself," said Bob Basel, director of listed trading at

Salomon Smith Barney

. "My take is this was a relief rally based on the oversold condition going into today. Rates are still going higher so I'm still on the fearful side."

Meanwhile, the

Nasdaq Composite Index

slid 12.68, or 0.3%, to 4577.82, but well off its late-morning low of 4466.42.

Although there's some debate about the significance of Dow 10,000, it seemed investor interest in so-called new economy stocks waxed and waned today in conjunction with the Dow's move to and from five-digit territory. The tech-inflated Nasdaq rallied for the early part of the afternoon as the Dow sustained its initial gains and then extended them. But the Comp faltered in the final hour as blue-chips retreated.


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experienced the most dramatic session among Nasdaq bellwethers. After rising as high as 76 1/2 on news of its

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business-to-business venture with major retailers, the database software giant did not much participate in the Comp's afternoon comeback attempt and then continued to decline into the close, finishing off 2.6% to 68 5/8. The

Nasdaq 100

fell 0.4%

In addition to the weakness in most of the biggest tech bellwethers, the Comp was restrained by a 7.4% decline in biotech stalwart


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Conexant Systems

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fell 16.3% after

SG Cowen

lowered its recommendation to buy from strong buy.

Continuing a recent theme and preventing bigger declines for tech proxies, chip stocks such as

Applied Materials

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Micron Technology

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remained in favor. The

Philadelphia Stock Exchange Semiconductor Index

rose 3.3%. Internet Sector index fell 21.56, or 1.8%, to 1154.55 while New Tech 30

slid 5.73, or 0.7%, to 776.39.

Unveiled Jan. 5, the TSC New Tech 30 is a market-cap-weighted index focusing on tracking the so-called hot money part of the market. The index was aided today by strength in


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RF Micro Devices


, which announced an alliance.


S&P 500

rose 14.69, or 1.1%, to 1348.05, benefiting from strength in recently punk groups such as retailers, financials and cyclicals while technology bellwethers significantly pared early losses.

In addition to the "natural" pendulum swing after recent action, several factors contributed to today's action. First,

Goldman Sachs

chief market strategist

Abby Joseph Cohen

said the S&P 500 was 5% undervalued. Second,

Morgan Stanley Dean Witter

upgraded several financial names, including

American International Group

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, up 4.3%, and


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, which rose 2.9%. Citigroup would have been a focal point regardless, amid changes in its

executive suite .


Philadelphia Stock Exchange/KBW Bank Index

rose 3.2% behind additional strength in

American Express

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, the biggest positive influence on the Dow industrials today.

The S&P Retailing Index

rose 4% while the

Morgan Stanley Cyclical Index

gained 1.3%.

But while market internals improved, they didn't reflect a wildly bullish attitude among investors. The

Russell 2000

closed up 0.94, or 0.2%, to 557.68 after trading as low as 548.13.


New York Stock Exchange

trading, 1.027 billion shares were exchanged while declining stocks edged advancers 1,493 to 1,466. In

Nasdaq Stock Market

action 1.788 billion shares traded while losers led 2,168 to 2,078. New 52-week lows bested new highs 210 to 34 on the Big Board while new highs led 276 to 140 in over-the-counter trading.

Beginning of the End?

In contrast to Basel's attitude, "I am encouraged by today's up move" for blue-chips, said Barry Hyman, chief market strategist at

Ehrenkrantz King Nussbaum

. "It's premature to say Friday is the bottom -- the recent trend has been awful Fridays and good Mondays. But I think

the correction is pretty much over. I¿m looking for a major blue-chip bottom forming in the next two or three weeks."

Pending rate hikes by the

Federal Reserve

will restrain blue-chip stocks but "I think enough damage has been done," Hyman said.

The prospect of higher interest rates caused the blue-chip correction, while the continued higher prices in the Nasdaq "accentuated the separation by drawing money away," the analyst continued. But that relationship will "level out" because "not every stock in the S&P is worthless."

Significant stock buyback announcements by major corporations in a variety of sectors signals corporate America recognizes the opportunity created by the selling, Hyman said. "Institutions see that and we get some firming in prices. Then the public will start to come back in."

The price of the 30-year Treasury bond fell 17/32 to 100 26/32, its yield rising to 6.19%.

Among other indices, the

Dow Jones Transportation Average

rose 10.52, or 0.5%, to 2361.78; the

Dow Jones Utility Average

gained 8.16, or 2.9%, to 288.15; and the

American Stock Exchange Composite Index

rose 20.84, or 2.2%, to 964.38.

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