After wild swings, Dow closes up Key stock index up 59.47 in recovery a day after big drop

2nd highest NYSE volume

August 06, 1998|By Bill Atkinson | Bill Atkinson,SUN STAFF

Investors took a dizzying ride yesterday, as the stock market dropped again, only to stage a stirring recovery one day after the Dow Jones industrial average and other indexes were clobbered.

The Dow rose 59.47 points yesterday, less than 1 percent, to close at 8,546.78 in a jarring session. It recovered after Tuesday's battering, in which the Dow plunged 299.43 points, or 3.41 percent, to 8,487, the third-largest point drop in the index's 102-year history.

"It was pretty much of a roller coaster ride," said John R. Boo, head of Nasdaq trading at Ferris, Baker Watts Inc. in Baltimore. "Kings Dominion can't touch this."

The closely watched index of blue-chip stocks clawed back after being down more than 124 points with about 30 minutes left in trading.

Trading volume yesterday was the second-heaviest in the New York Stock Exchange's history, with 859 million shares changing hands. Volume Tuesday was 852 million shares.

Boo was pleased with yesterday's outcome. "We made several volatile moves to the downside and rebounded each time, and closed really strong. There were bids all over the place after the close," he said.

But the gain did little to repair the damage that has been done in the past 2 1/2 weeks of trading. The Dow has lost 791 points, or 8.4 percent of its value, since it hit a record high of 9,337.97 on July 17.

The market swung wildly during the day, as two highly regarded experts weighed in with opposing opinions on where stocks are heading.

Ralph J. Acampora, a market strategist at New York-based Prudential Securities Inc., reaffirmed his position that blue-chip stocks, which have been leading the market, could fall by as much as 20 percent in coming months.

He reasoned that earnings are deteriorating at big companies, as problems with Asia's economy worsen.

Acampora, who has been one of Wall Street's most outspoken bulls, turned bearish Tuesday, saying the Dow could fall 1,000 points within a couple of months.

"The companies that I think are starting to unwind their stock activity is suggesting that it is going to be a longer-term problem and that it might be six months to a year," he said in an interview with Bloomberg News.

'Overreaction'

Abby Joseph Cohen, Goldman Sachs & Co.'s highly regarded chief market strategist, disagreed, saying in a statement yesterday morning that "recent price declines represent an overreaction" and that stock prices have reached bottom.

Cohen said fears of a strong dollar damaging the economy have been exaggerated and that inflation is "hard to find."

She sees the Dow hitting 9,300 by the end of the year.

Yesterday's rally boosted other indexes, including the Standard & Poor's 500-stock index, a much broader measure of the market than the Dow.

S&P, Nasdaq up

The S&P 500 rose 9.31 points to 1,081.43.

The Nasdaq composite index, where many technology issues are traded, was up 2.56 to 1,788.20 points.

Both those indexes were smashed Tuesday, too. The S&P fell 40.32 points, or 3.62 percent, and the Nasdaq slipped 65.46 points, or 3.54 percent.

Brokers and money managers loaded up yesterday on stocks that had been beaten down in Tuesday's plunge.

"I was looking for good values to buy for my clients in the blue-chip sector," said Gerald Scheinker, a broker in Pikesville at Legg Mason Wood Walker Inc.

He said he snapped up shares of AlliedSignal Inc., Minnesota Mining and Manufacturing Co., and the DuPont Co.

"In a down market, I try to upgrade the client's portfolio," he said.

Many calls

Scheinker said he had a "tremendous amount of calls" Tuesday and yesterday from clients who were "looking for reassurance that the world wasn't coming to an end."

Judith A. Jones, who manages $500 million for Cleveland-based Key Asset Management Inc., said she has been picking up cheap stocks, such as Sherwin-Williams Co. and Bowater Inc.

"I nibbled away at oils, too," she said.

But she said she stayed away from blue chips such as Cisco Systems Inc. and International Business Machines Corp. because they are too expensive.

Despite Tuesday's downturn, Jones was optimistic about the market's prospects.

'A good year'

"This has been a good year already; I just don't see it evaporating," she said. "The economy is good."

Don Hays, investment strategist at Richmond, Va.-based Wheat First Union, paints a far bleaker picture. For weeks, he has been warning investors of a stock market crash in October that could take the Dow down more than 2,200 points. He recommends buying bonds, utilities and gold stocks.

"Investors should be taking a very defensive stance," he said. "I would be sticking with something that has some value to it."

Pub Date: 8/06/98

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