Bargain hunting pulls stocks higher
Wednesday, February 20, 2002
AP Business WriterNEW YORK (AP) -- Bargain hunting gave the stock market a generous boost Wednesday, as investors took advantage of lower prices after a two-day selloff and sent the Dow Jones industrials up nearly 200 points.
Investors traded more cautiously in the tech sector, however, troubled by reports of improper accounting at Computer Associates.
The Dow rose 196.03, or 1.7 percent, to close at 9,941.17, according to preliminary calculations, partly recovering from a drop of 256.85 in the previous two sessions.
The Nasdaq composite index lagged behind the Dow for much of the day, but in a late surge gained 24.98, or 1.4 percent, to 1,775.59. The Standard & Poor's 500 index rose 14.64, or 1.4 percent, to 1,097.98.
Depressed prices, not hopes for the economy, have served as the only catalyst for buying on Wall Street for several weeks. Trading so far this year has largely been dominated by selling on fears about poor business, earnings and corporate bookkeeping in the wake of Enron's collapse.
"The market appears to be one where we are seeing lots of rallies, lots of sell-offs," said Alan Ackerman, executive vice president of Fahnestock & Co. "There's little conviction and little leadership needed to get the market going."
Many of the market's gains also grew out of short covering as investors who bet prices were headed lower were forced to buy stocks to cover their positions. The prevalence of shorts in the market is another sign of investors' lingering pessimism.
"We're beaten up pretty good. So, every now and then we lift up. But the only thing that allows the market to move up a bit is short (investors) cover and bargain hunters step in, but then it fades," said Larry Wachtel, market analyst for Prudential Securities.
Accounting concerns again plagued Wall Street. Computer Associates plunged 17.4 percent, down $4.40 to $20.91, on reports published in Newsday and The New York Times that federal prosecutors are investigating whether the company deliberately overstated sales and profits to inflate its stock price.
IBM, which dropped Friday on reports that were critical of its accounting, slipped 23 cents to $99.31.
But Wall Street's lower prices helped the market at least temporarily set aside their accounting concerns. Half of the Dow's 30 stocks were up more than $1, with the biggest advance coming from 3M, up $3.73 at $117.10.
Dow industrial DuPont gained 82 cents to 46.33 on an upgrade, to "strong buy" from "market perform", by Deutsche Banc Alex Brown.
Analysts' upgrades helped other stocks, and gave investors hope that some businesses are poised to turn around. Circuit City climbed $2.21 to $24.32 after Merrill Lynch raised its near- and long-term recommendations to "strong buy" from "buy."
Oracle rose 72 cents to $15.51 after Banc of America upgraded the software maker to "buy" from "market perform."
Analysts don't expect Enron to be a long-term drag on the market, and still believe business will recover in the second half of 2002.
"In the short term, we do have a lot of uncertainties. You have all the accounting issues out there that will spook investors. And, all depending on what company reports (earnings or outlook) today, people get lifted up or very dejected," said Rafael Tamargo, director of equity research at Wilmington Trust. "But the odds are for upside, not downside. We have already had the slowdown."
The market was barely swayed by a report that consumer inflation inched up 0.2 percent in January, after dipping 0.1 percent in December. As the recession approaches its one-year anniversary next month, investors and analysts likely believed the uptick in the Labor Department's Consumer Price Index was an indication that the economy is strengthening.
The market usually sees an increase in inflation as a negative.
Advancing issues outnumbered decliners slightly less than 3 to 2 on the New York Stock Exchange. Volume was moderate.
The Russell 2000 index, the barometer of smaller company stocks, rose 7.27, or 1.6 percent, to 467.25.
Overseas, markets were mostly lower Wednesday. Japan's Nikkei stock average finished down 0.1 percent. In Europe, France's CAC-40 stumbled 0.4 percent, and Britain's FT-SE 100 fell 1.3 percent, but Germany's DAX index gained 0.3 percent.
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