After a lethargic half-day of swinging in and out of positive territory, stocks mustered up a little conviction this afternoon and pieced together a decent rally at the end of the session.
Dow Jones Industrial Average
ended the day up 113.08, or 1.1%, to 10,535.35, after hitting an intraday low around 10,368 around 1:00 pm EDT. The
Nasdaq Composite Index
pocketed a much appreciated 106.05 points, or 3.4%, to 3270.60, nothing stellar considering yesterday's 200-point slide to a six month low, but pretty good considering it was down more than 120 points at its intraday low. The small-cap
rose 2.72, or 0.6%, to 461.73, while the broader
sailed up 25.19, or 1.8%, to 1399.05.
"The market has been under a lot of pressure, especially technology stocks," said Tony Cecin, manager of Nasdaq trading at
U.S. Bancorp Piper Jaffray
. "When the Comp got down about 100 points, obviously some bargain hunters came in. There was not any news that accounted for the run back up."
News of United Airlines parent
$4.3 billion agreement to acquire struggling carrier
dominated the day and boosted the airline and transportation sector.
Dow Jones Transportation Average
jumped 74.8, or 2.7%, to 2829.07, while the
American Stock Exchange Airline Index
Shares of UAL were under pressure, though, falling 11.9% after investors caught wind of the heady $60 a share it is shelling out for US Airways, a 137% premium over its closing price yesterday. Meanwhile US Airways shares soared 85.3%, to close at 48 3/4.
The merger caused a flurry of speculation in the industry over whether a consolidation trend will ensue, and which companies would benefit or miss out on potential deals.
analyst Candace Browning weighed in with an in-depth industry report stressing her view that airline stock prices remain undervalued. Browning also downgraded American Airlines parent
saying that the company would likely respond to the deal in some way but that "responding could be very expensive". AMR slid 7.9%. On the other wing,
flew 19.6% after Browning pegged it as "an attractive acquisition candidate" and lifted her rating on the stock.
Speaking before the markets started to gain ground, Adam Wagner, president of
Wagner Hermann & Herbst
in Houston was simply shaking his head at the broader market action. "There is no way to peg a direction. My biggest question is what it's going to take to get the buyers to come back in." Wagner noted the action in his semiconductor holdings as just one sector that has been hit by irrational price swings and to
Integrated circuits maker Anadigics lost more than 50% in the last week alone from a close of 58 1/4 on May 16 to today's close at 26 7/8. Wagner pointed out the stock's May 1 close of 76 1/4 and said in the time period since then, the only news on the company was a standard filing with the
Securities and Exchange Commission
and positive comments from
on May 2. "There is no logic that you can apply to
its moves," said Wagner.
Philadelphia Stock Exchange Semiconductor Index
rebounded slightly today, gaining 5.2% after sinking to a year-to-date low yesterday. "The irony is that if you look on any news station, everyone is saying the demand for semis is good and earnings growth is going to be there, but nobody is stepping up to the plate to buy," he said, adding that with 100% to 200% earnings growth ranges and price-to-earnings ratios around 42, many of these stocks are "a steal".
Capital goods stocks showed a little strength with Dow component
Illinois Tool Works
rose 4.2% after
Credit Suisse First Boston
initiated coverage with a buy rating and a price target of 85.
tacked on 5.7% and
moved up 4.8%.
The retailing sector got slammed after warehouse giant
fell short of third-quarter earnings estimates by a fraction and warned of a possible shortfall in the fourth quarter.
Morgan Stanley Dean Witter
cut their ratings and the stock tumbled 21.5%.
The bad news left other retailers looking pretty rumpled, including electronics retailers
, which fell 5.4%, and
, which shed 8.2%. The
S&P Retail Index
Regional banks were taking in some cash.
climbed 5.7% and
ran up 3.6%.
Larger financial stocks were not faring quite as well, with
down 1.5% and
fell 2.1% after saying it would buy small New York investment bank
for a price tag said to be between $450 million and $500 million according to published reports. The
American Stock Exchange Broker/Dealer Index
lost 2.6% while the
Philadelphia Stock Exchange/KBW Bank Index
TheStreet.com Internet Sector
index rose 12.44, or 1.6%, to 771.25.
Bad Day for the E-Brokers
Online brokers followed the Nasdaq down early today, but failed to follow it back up.
led the way into subterranean territory. It plunged 11.5%, or 1 13/16, to 13 15/16.
dropped 4.9%, or 37/64, to 11 3/16 and
fell 6.7%, or 2 3/4, to 38 1/4.
Today's impetus came from a report from Scott Appleby, an analyst at
. Appleby said he expected that June-quarter trades will fall as much as 25% at online brokers, thanks to the Nasdaq's own declining trading volume. (
wrote about this issue earlier this week.) So he cut his earnings and revenue estimates for E*Trade, Amertrade and
, a market maker whose big customers are online brokers.
Breadth was about even on the Big Board but negative on the Nasdaq on much better volume.
New York Stock Exchange:
1,405 advancers, 1,483 decliners, 1.138 billion shares. 37 new 52-week highs, 117 new lows.
Nasdaq Stock Market:
1,612 advancers, 2,488 decliners, 2.057 billion shares. 14 new highs, 372 new lows.