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The Market Story: No Gold Medals, but Dow Still Makes Valiant Comeback

The Dow looked like it would be a huge loser at midday. While still ending down, it fought the good fight all afternoon.
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Like the games of the 27th Olympiad, the stock market boosted players' adrenaline today. And similar to the most exciting events in Sydney, the trading day ended with a round of comeback performances.

The

Dow Jones Industrial Average, which was down and out at the midday mark and the

Nasdaq Composite Index both hustled to close the day well off their session lows.

Sinking over 200 points this afternoon, the Dow started swimming late in the day -- even if it was an underwater stroke -- to end the session down 101.37, or 0.94%, to 10,687.92. The Nasdaq, which had fallen sharply earlier in the day, landed on its feet ending up 31.80, or 0.82% higher, to 3897.44.

The

S&P 500 shed 8.56, or 0.59%, to 1451.34, while the

Russell 2000 lost 1.88, or 0.36%, to 521.43.

Market themes -- which include high oil prices, a weak euro and a spate of profit warnings -- have discouraged market supporters from buying all week long. But in the last hour of trading today, investors stopped selling and started stepping up to the plate.

Why? Traders offer a couple of views for this afternoon's rally.

The market was in a "severe oversold condition earlier this afternoon", says Jon Olesky, head of block trading at

Morgan Stanley Dean Witter

. "Once the sell side felt completed late in the day, the buy side to came back."

According to Mark Donohoe, managing director of institutional equity trading at

U.S. Bancorp Piper Jaffrey

, a trading bounce triggered today's buying. "We're still stuck in a trading range," says Donohoe, "and until this market sets a trend, it will be difficult to operate."

But Donohoe noted that "people have begun to speculate that the price of oil will fall." And that may have something to do with this afternoon's rally. At 2 p.m. this afternoon, U.S. Treasury Sec. Lawrence Summers stepped up and threw the market a life preserver with comments on global currency and energy markets.

"We are obviously watching developments in the oil market very, very closely," Summers told reporters this afternoon. "I expect that oil will be among the topics that will be discussed" at this weekend's

G-7

meeting.

The price of oil, which hit a decade high today, ended the day at $36.70 off today's 37.80 high. The

American Stock Exchange Oil & Gas Index

fell 1.2% and the

Philadelphia Stock Exchange Oil Service Index

dropped 2.4%.

ExxonMobil

(XOM) - Get Report

slipped 0.9%. Oil service company

Schlumberger

(SLB) - Get Report

shed 1.7%, while

Halliburton

(HAL) - Get Report

fell 3.8%.

Impacted by higher oil prices, however, the transport sector traveled on negative terrain all day. The

Dow Jones Transportation Average

closed down 0.5%. This morning, component

CNF Transportation

(CNF) - Get Report

dropped 5.74% to $23.63 after warning last night it sees lower-than-expected third-quarter earnings because of lower operating profits for its air freight unit.

Boeing

(BA) - Get Report

was one of the Dow's few components to be on the upside all day. News that the company raised its fiscal 2000 free-cash flow estimate to more than $4 billion sent its stock to close up $2.31, or 4.1%, to $59.06.

Earnings warnings, however, weighed down communications stocks today. Long-distance carrier

Sprint

said it expects third-quarter earnings of 45 cents to 47 cents a share, lower than the

First Call/Thomson Financial

consensus for 49 cents per share. As a result, its stock fell 5.1% to $26.81.

But, today's most impressive gains were made in the technology arena, with technology stocks

Sun Microsystems

(SUNW) - Get Report

,

Yahoo!

(YHOO)

and

Oracle

TST Recommends

(ORCL) - Get Report

all making positive strides.

Down 19.21 points earlier today,

TheStreet.com Internet Sector Index

closed behind only 2.37 points. The index's stock to net the biggest win today was

eBay

(EBAY) - Get Report

, which set a revenue goal of $3 billion in 2005 today. The online auction company soared $10.88, or 16.6%, to a $76.56 close.

Market Internals

Breadth was negative on heavy volume.

New York Stock Exchange: 1,144 advancers, 1,651 decliners, 1.106 billion shares. 47 new 52-week highs, 130 new lows.

Nasdaq Stock Market: 1,653 advancers, 2,360 decliners, 1.77 billion shares. 76 new highs, 152 new lows.

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Most Active Stocks

NYSE Most Actives

  • Sprint PCS (PCS) : 33.2 million shares.
  • AT&T (T) - Get Report: 25.6 million shares.
  • Lucent (LU) : 20.5 million shares.

Nasdaq Most Actives

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Sector Watch

The

Dow Jones Utility Index

posted losses all the way until the close today, ending down 2.23%.

Meantime, the

Nasdaq Biotechnology Index

boosted 33.5 points, or 2.69%, to 1278.2.

The

American Stock Exchange Broker/Dealer Index

, which had been hopping amid merger mania, was lower 0.66% today.

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Bonds/Economy

Bond prices are falling as oil has resumed its record-setting climb. Continuing the recent trend, long-term yields are rising more than short-term ones, indicating that bond investors are worried about faster inflation as a result of rising energy prices.

With oil trading over $37.50 a barrel for the first time in 10 years, the benchmark 10-year Treasury note was down 3/32 to 98 27/32, lifting its yield to 5.905%.

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International

European markets were in bad shape at the end of the day.

The

FTSE 100

ended down 123.60 to 6279.9, a 1.9% decline.

Across the channel, the

CAC 40

in Paris ended down 124.52 to 6405.43 and the

Xetra Dax

in Frankfurt was down 118.09 to 6819.65.

The euro was still losing ground, down $0.8472.

Asian markets traded higher overnight.

A late-day rally in selected technology shares helped nudge key Japanese indices a hair higher Tuesday. But the buying continued to be countered by selling from institutional investors that shed blue-chips ahead of book closings for the fiscal first half.

The

Nikkei 225

index rose 63.03 to close at 16,124.19.

Hong Kong's

Hang Seng

index rose 117.04 to close at 15,677.20, reversing the ugly 4% drop recorded yesterday. A bout of short-covering in the futures market, along with property shares rallying helped sentiment today.

Cheung Kong

rose HK$2.50, or 2.7%, to 94.25 ($12.09), while

Sun Hung Kai Properties

climbed 2.25, or 3.5%, to 66.75.

Korea's

Kospi

index declined for the ninth straight session, closing down 6.39, or 1.1%, at 571.17. Investors are still fleeing the market on worries over slowing corporate restructuring. Taiwan's

TWSE

index also fell 175.24, or 2.5%, to end at 6734.90.

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