Those Old Economy
stocks that have been beaten down and oversold are finally a buy. So has tech mania finally bit the dust, or are those
darlings of sessions gone by just getting a dose of their own medicine?
This week, Wall Street insiders who have been trying to make sense of the market's recent activity seem to agree that we're about due for some follow-through. "More of the recent same, more Old Economy stocks and violent moves up and down," said Larry Rice, chief investment strategist at
. "It's a trader's utopia."
Lately the Dow Jones Industrial Average was soaring 397, or 3.9%, to 10,528, having traded as high as 10,584.37. It's on pace to top its previous record point gain, a rise of 380.53, or 5%, to 8020.78 on
Sept. 8, 1998. Financials
were the index's highest flyers, while tech giant
was being a drag, down 4, or 3%, to 128.
Philadelphia Stock Exchange/KBW Bank Index
rocketed 7.7% and the
American Stock Exchange Broker/Dealer Index
Oil stocks were helping to fuel trading on the
New York Stock Exchange
American Stock Exchange Oil & Gas Index
index was burning up 3.7%, with
up on news that Phillips would acquire Arco's Alaskan oil and gas assets, paving the way for an Arco-
So what's the deal? Just last week, investors were indulging in tech stocks with huge valuations and no earnings to show for themselves. According to Brian Finnerty, head of trading at
C.E. Unterberg Towbin
, the answer might lie in the recent economic data. "Since Friday, the psychology has changed," he said. "We have seen good numbers right in a row and know that we don't have any inflation, which is letting the financials and consumer nondurables be bought." He was referring to today's
Producer Price Index
, whose core figure was up only moderately, and yesterday's muted
Peter Cardillo, chief investment strategist at
, agrees that the data are a major contributor. "Hints in the industrial production number and the weak unemployment claims indicate that the economy is slowing and as a result, the Old Economy is in play," he said.
Undoubtedly, investors are changing their ways, but everyone knows old habits die hard. "The market will pay for growth again when it gets down enough, that's for sure," said Finnerty.
Rice added, "Another day of this and the Old Economy will be overbought, and money will bounce back into tech."
But just as the Dow toyed with, then broke below, the key 10,000 support level, the Nasdaq has a rubicon of its own, Cardillo said. "The divergence is in favor of the Old Economy," he said. "The real test is for the Nasdaq is 4500. A close under 4500 could signal a correction that could take us down another 5% to 10% below where we're at."
Lately the Nasdaq was continuing to struggle, down 15 1/2, or 0.3%, to 4567. It earlier traded as low as 4455.10. Yesterday's losses left the Composite down more than 9% from
Friday's record, less than a percentage point short of a 10% correction.
Semiconductors were losing ground. The
Philadelphia Stock Exchange Semiconductor Index
fell 1.8%, with
plummeting 30 3/4, or 7.2%, to 391 1/4.
Elsewhere in techland,
The Street.com Internet Sector
index lost 22, or 1.9%, to 1173.
was bouncing back from the losses it sustained yesterday, after
Tuesday-night report of a possible merger with
. The auction giant was also in recovery mode.
leapt 41, or 3%, to 1433 1/2, while the small-cap
slipped a fraction to just under 559.
Breadth on the NYSE was positive on moderately heavy volume.
New York Stock Exchange:
2,234 advancers, 696 decliners, 923 million shares. 37 new 52-week highs, 33 new lows.
Nasdaq Stock Market:
1,829 advancers, 2,272 decliners, 1.2 billion shares. 45 new highs, 77 new lows.
For a look at stocks in the midsession news, see Midday Movers, published separately.