A late-day rally lifted the major market indices after Wednesday's session snapped a six-day winning streak for technology stocks and cut into the latest blue-chip rally. Earlier, stocks were pressured in the day by new data that showed home sales fell sharply last month.
Ahead of the Memorial Day weekend and after three days of rain in New York, some traders left the turrets early to enjoy something other than trading. "The sellers dried up," said Bob Basel, a trader at
Salomon Smith Barney
. "Everyone went home for the weekend. There's a lack of liquidity on the sell side."
Without enough supply to meet demand, traders were paying higher prices for shares and both the
Dow Jones Industrial Average and
Nasdaq Composite Index came off their lows of the day. The Nasdaq ended the day up 38.6 to 2282, rising to session highs as the bell tolled. The Dow was 16.91 higher to 11,122.42.
One reason behind that late-day strength was dot-com stocks, led by e-tailer
, which rocketed in the last two hours of the trading day. At 2:00 p.m. EDT, the online retailer sat at $15.35. When the closing bell rang at 4 p.m., it had hit $16.75, a 7.4% gain in 120 minutes. Amazon traded a quarter of a million shares in a five-minute-span between 3:20 p.m. and 3:25 p.m.
The move was for real, but the reason is a mystery. With no news breaking in the late day and most dot-coms not yet reporting earnings, catalysts are scarce. "I don't really see any material news that would move these guys," said
analyst David Kathman. "The only thing I can think of is a short squeeze." A short squeeze is when investors who short a stock -- that is, they borrow stock in expectation the price will fall and it can be replaced more cheaply -- are forced to cover their bet.
TheStreet.com Internet Sector Index
ended up 2.3%, one of the best technology sectors today. Portal giant Yahoo! gained 5.3% to $21.53, while online auctioneer eBay gained 3.9% to $63.26. The lone major loser was
AOL Time Warner
, which fell 1.8% to $54.28.
Biotechnology stocks were big winners today, with the
American Stock Exchange Biotechnology Index
gaining 4.2% to 625.50. That's still quite a ways from its 52-week-high of 811.60, but a nice recovery after sliding 6.1% yesterday.
Early in morning, Wall Street had turned its attention to Capitol Hill. Just after the opening bell, Sen. James M. Jeffords, a Vermont Republican, confirmed his decision to leave the GOP to become an independent. The move gives the Democratic party operational control of the United States Senate. After the announcement, which lifted uncertainty about the balance of power in the Senate, stocks temporarily traded higher.
The news of Jeffords' party swap was publicized yesterday, and Wall Street analysts are torn over the impact it is having on stocks. Some say the move has pressured sectors that typically benefit from Republican-supported legislation. Along those lines, the
American Stock Exchange Pharmaceutical Index
was off 0.4%. But the
American Stock Exchange Tobacco Index
, which is typically expected to have an advantaged under GOP leadership, rose 0.6%. The modest moves give credence to the cynical argument that the already deadlocked Congress will be just as ineffective now, if not more so.
Shortly after 10 a.m. EDT, market averages turned the early-morning gains to losses after the release of a government report showed sales of new homes last month fell 9.5% from March, the largest percentage drop since 1997. The data sparked fears the economic slowdown could hit the housing market, which has held up well despite the domestic economic slowdown.
Since May 15, when the
Federal Reserve cut interest rates for the fifth time since the beginning of the year, Wall Street has essentially bet the series of reductions will have a positive effect on the economy. The Dow crossed 11,000 last week, and the Nasdaq is trading back above a key technical level of 2200.
Stocks have been on a general up trend since early April. The Nasdaq is almost 40% higher than April 4, when it fell to a recent low of 1638.8. It's still more than 50% off its all-time high, however. The Dow is more than 18% above its two-year low of 9389.48 hit March 22 and 5.1% off its high.
In other economic news,
initial jobless claims for the week ended May 19 rose 15,000 to 407,000, the government reported this morning. Economists were expecting a drop in the number of filings for unemployment. The Fed and market participants are closely watching the employment scene: The jobless rate climbed to 4.5% in April.
Wall Street awaits
Alan Greenspan's speech this evening on economic developments before the Economic Club of New York.
And no matter what the state of the economy, it seems people can't get enough of donuts -- or shall we say donut stocks?
gained 5% to $72.92, bringing its 15-day-gain to a respectable 71%. It hit another 52-week-high of $75 earlier today. Over on the Nasdaq, biotechs topped the charts.
Protein Design Labs
had better than 7% gains.