Market Perks Up as January (Finally!) Comes to a Close
SAN FRANCISCO -- Like a coffee drinker deprived of caffeine for weeks and then suddenly downing a double espresso, the stock market bounced back today from last week's heavy selling.
On the final day of what has been a rough month, formerly "sleepy" financial and value stocks led the upturn and helped tech names awaken from their recent stupor, which they did in rousing fashion.
Volume levels were somewhat subdued ahead of the
Federal Reserve's
two-day meeting, which begins tomorrow. But the session did not lack for drama.
Picking up where they left off
Friday, tech proxies opened the session with steep declines while their blue-chip counterparts resisted the downdraft. At session's end, the
Nasdaq Composite Index
had totally erased its initial decline and joined the
Dow Jones Industrial Average
and
S&P 500
in solidly positive territory.
The Dow closed up 201.66, or 1.9%, to 10,940.53 after trading as high as 10,956.67 and as low as 10,701.64. The
S&P 500
rose 34.30, or 2.5%, to 1394.46 after trading as low as 1350.05.
TheStreet Recommends
As impressive as gains for the blue-chip averages were, the Nasdaq Composite once again stole the spotlight with its big comeback. Once as low as 3748.03, the index roared back to close up 53.28, or 1.4%, to 3940.35. At its intraday nadir, the index was 11.5% below its
Jan. 21 all-time high of 4235.40.
In the immediate aftermath of the session, traders were grasping for explanations for the market's afternoon surge. However, some said no explanation was necessary. .
"Essentially, the same backdrop that's driven the market higher is still here -- good earnings and relatively low interest rates," said Jim Herrick, managing director of trading
Robert W. Baird
in Milwaukee who said a 25-basis-point increase from the Fed is already priced into the market. "I think we just got to levels low enough on the Nasdaq where you're going to see money coming into these names."
The Comp's comeback was fueled by tech bellwethers such as
Intel
(INTC)
, which rose 5.2% after
Credit Suisse First Boston
added the chip giant to its "Focus List."
Further aided by
Motorola's
(MOT)
6.4% rise, the
Philadelphia Stock Exchange Semiconductor Index
gained 3.8%.
Also sporting strong gains were stalwarts such as
Sun Microsystems
(SUNW)
,
Cisco
(CSCO)
and
MCI WorldCom
undefined
. Additionally,
Qualcomm
(QCOM)
rose 14.8% after
The Wall Street Journal
reported the company is closing in on a wireless technology deal with
China United Telecommunications
. Once as low as 3349.06, the
Nasdaq 100
finished up 3.6% at 3570.05.
The index was hampered by weakness in Internet favorites as well as recent momentum favorites such as
Red Hat
undefined
and
FreeMarkets
undefined
, which fell 16.2% although its fourth-quarter loss was less-than-expected.
For more on FreeMarkets, take a look at the
story written today by
TheStreet.com/NYTimes.com's
joint newsroom.
TheStreet.com Internet Sector
index fell 22.86, or 2.1%, to 1052.14 after trading as low as 1007. Meanwhile,
TheStreet.com New Tech 30
, edged higher by 3.01, or 0.5%, to 583.10. Unveiled Jan. 5, the TSC New Tech 30 is an expanded index designed to replace the
Red Hots
index: The market-cap-weighted index remains focused on tracking the most scorching part of the market, the magnet for Wall Street's hot money. A list of the new index components is available at
http://www.thestreet.com/newtech/.
Financials Fuel Dow, And Slowdown Talk
At the other end of the valuation spectrum, the Dow got its biggest boost from
J.P. Morgan
(JPM)
and
American Express
(AXP)
, reflecting the overall strength in financials. The
Philadelphia Stock Exchange/KBW Bank Index
rose 4%.
Other names helping the Dow included
ExxonMobil
(XOM)
,
AT&T
(T)
, Intel and
3M
(MMM)
.
Drug makers also continued their nascent bounce; the
American Stock Exchange Pharmaceutical Index
rose 3.2%.
Immunex
undefined
, rose 12.6% after receiving preliminary approval
late Friday to market a cancer drug to treat certain form of multiple sclerosis.
Strength in banking stocks came despite weakness in the long end of the bond market, which surrendered some of
Friday's huge gains. The price of the 30-year Treasury bond fell 15/32 to 95 7/32, its yield rising to 6.48%.
Today's setback notwithstanding, the long bond's recent rally has fueled the comeback in financial stocks, which are "discounting bonds not going through 7%," said Peter Green, director of technical research at
Gruntal
. "In my opinion, we're discounting a slowdown in the economy."
In addition to the recent signs of life in financials, Green noted strength in utility stocks and long-term weakness in housing and credit card concerns, as well as economically sensitive stocks such as
Phelps Dodge
(PD)
and
Armstrong World
(ARK)
. Those trends, along with the inversion of the yield curve, suggest an economic slowdown is in the offing, he said.
As for today's action, Green noted the Dow reclaimed its 200-day moving average of 10,876 and the Comp "basically held" at its 50-day moving average of 3778.
"We're going to have a bounce here," the technician said, noting some of the "excess sentiment" has been washed out by the market's recent weakness.
Still, the Dow will face resistance around 11,000 and the Comp around 4000, he said, acknowledging any near-term forecast is colored by uncertainty about what the Fed will do this week.
The
Russell 2000
declined 8.39, or 1.7%, to 496.23 reflecting the prevailing negativity in market breadth.
In
New York Stock Exchange
trading, 993.8 million shares were exchanged while declining stocks bested advancers 1,620 to 1,448. In
Nasdaq Stock Market
action 1.51 billion shares traded while losers led 2,592 to 1,590. New 52-week lows bested new highs 162 to 19 on the Big Board and by 109 to 64 in over-the-counter trading.
Among other indices, the
Dow Jones Transportation Average
fell 10.10, or 0.4%, to 2571.65; the
Dow Jones Utility Average
rose 8.56, or 2.8%, to 315.14; and the
American Stock Exchange Composite Index
shed 7.99, or 0.9%, to 860.25.
For the month of January, the Dow fell 4.8%, the S&P slid 5.1%, the Nasdaq shed 3.2%, the Russell declined 1.7%, the DOT shed 8.9%, the TSC New Tech 30 lost 5.6%, the Dow transports dumped 13.6%, the Dow utilities soared 11.2% and the Amex Composite fell 1.9%.
Market data above are preliminary. For coverage of today's top stocks in the news, see the Company Report, published separately
.
