Bargain hunters revive Wall Street hopes
Associated Press
NEW YORK — Bargain hunters drove up stock prices yesterday, a rare bright spot to mark the end of one of the market's worst quarters in decades.
Investors overlooked signs that the economy has slumped even further and put aside fears about a recession to take advantage of cheaper prices of long-battered tech stocks and recently hard-hit blue chips. Likewise, mutual fund and money managers made end-of-quarter trades — selling losers and picking up winners — to better their portfolios' overall first-quarter results.
Despite yesterday's moderate gains, analysts cautioned about getting overly optimistic that the market is ready to sustain a rally.
"You are going to hear a lot of talk now that it was such a bad quarter that things have got to get better, but so far nothing has changed," said Gary Kaltbaum, market technician for First Union Securities, noting that earnings and the economy have been severely crippled.
"With the way the economy has fallen off the cliff, it is going to take a while to get things going again," he said.
The Dow Jones industrial average rose 79.72 to close at 9,878.78, but still posted its worst first quarter ever in terms of points — down 908.07 — and its 10th-worst in terms of percentage loss. The 8.4 percent decline for the first three months of 2001 was the Dow's worst first-quarter performance since 1978.
The Nasdaq composite index finished up 19.69 at 1,840.26, after closing Thursday at its lowest level in more than two years. The tech-heavy index fell 25.5 percent during the first three months of 2001, ending its worst-ever first quarter, and is now more than 63 percent off its high of 5,048.62 reached last March.
The Standard & Poor's 500 index gained 12.38 to close at 1,160.33, though remains in bear market territory, more than 24 percent off its high.
Yesterday, investors traded cautiously, partly on expectations that earnings will continue to suffer in the coming months, and partly because of a report by the Purchasing Management Association of Chicago, analysts said. The group reported that its index of business activity in the Midwest fell to 35.0 in March, its lowest level since March 1982. Any number below 50 indicates business in the manufacturing sector is contracting.
Analysts had expected a reading of 43.5, slightly higher than the 43.2 level reported for February. The Chicago survey is watched closely for clues to the index of the National Association of Purchasing Management, which will be released Monday.
Blue chips have fallen hard in the past two weeks — with the Dow briefly landing in bear market territory last week — as investors saw signs that the ill effects of the slowing economy have hurt more than just the technology sector.
For example General Motors is idling plants as it whittles down inventories, and Procter & Gamble announced last week it is slashing 9,600 jobs worldwide. GM, which plans to temporarily halt work at five plants next week, slipped 24 cents to $51.85.
Investors' overall sense of caution could be seen in their buying, which was strongest in some of the safer sectors like drug and energy stocks. Merck climbed $1.70 to $75.90, while Enron rose $2.79 to $58.10.
Analysts doubted any gains would be long lasting given the fact that companies will begin announcing their first-quarter earnings in about two weeks.
"You can't generate much of a rally in this market," said Ricky Harrington, a technical analyst for Wachovia Securities in Charlotte, N.C.
While a litany of companies have warned that first-quarter earnings will miss expectations, the question looming on Wall Street is whether those shortfalls have already been accounted for in the lower prices of many stocks.
"We have got to get to a point where the earnings disappointments stop coming in, or at least aren't so bad and where the market can say that these earnings have been factored in," to lower stock prices, said Dan Ascani, president and research director at Global Market Strategists in Gainesville, Ga.
