Market rebound ends 4-day rout 288-point Dow gain is 2nd largest ever, but traders are wary

'Worries are still there'

Bull HTC investors defend the market, shop for bargain-price stocks

September 02, 1998|By BILL ATKINSON | BILL ATKINSON,SUN STAFF

The stock market surged yesterday in a furious session of trading as investors scooped up battered stocks and appeared to shake off worries about troubled economies around the world.

The Dow Jones industrial average jumped 288.36 points, or 3.82 percent, to 7,827.43, marking its second largest point gain in history.

Trading on the New York Stock Exchange soared to a record 1.2 billion shares, compared with 914.6 million shares traded Monday, when stocks collapsed, causing the Dow to lose 512.61 points in its second largest point loss in history.

Yesterday's rise helped the Dow - a bellwether index made up of 30 big companies - recover more than 56 percent of Monday's loss and snap a four-day rout, which pushed it into negative territory. The index is still down 1.02 percent for the year.

Despite yesterday's gain, some experts barely smiled, saying the rise was nothing more than a temporary boost that typically follows big sell-offs.

"It looks good, it feels good. I have to say I am not a believer," said George K. Jennison, managing director of Nasdaq trading at Wheat First Union in Richmond. "This feels very short-term. In the end, the worries are still there."

Jennison and others are concerned that economic problems in Japan, Asia and Russia will not be resolved soon and will spill into the U.S. economy, weaken earnings of companies here and drive down their stocks.

"The market does the maximum things to fool the maximum number of people," said Charles A. Knott Jr., chief investment officer at Philadelphia-based Logan Capital Management Inc., which has about $500 million in assets under management. "Our perspective is one of a great deal of caution. We have gone in a cash-raising mode."

Knott's advice to investors: "Don't be fully invested," he said.

Indeed, the global worries that in recent days have wreaked havoc with the market appeared to flare up about 20 minutes after the opening bell, when the Dow nose-dived about 260 points. But it recovered shortly before 10:30 and staged a major rally, which touched many companies.

The Nasdaq stock market, which suffered its largest loss ever Monday, jumped 75.84 points, or 5.06 percent, to 1,575.09, on volume of 1.25 billion shares, the second largest share-volume day ever.

The Standard & Poor's 500 stock index, a broad gauge of the market, rose 36.98 points, or 3.86 percent, to 994.24. Even the badly damaged Russell 2000, which is made up of small-company stocks, rose 10.15 points, or 3 percent, to 348.10 points.

Many stocks battered Monday were again in favor. Dell Computer Corp., which plunged $18.75 a share Monday, jumped $8.375, to $108.375; Microsoft Corp., down $9.312, rose $5.3125, to $101.25, and Coca-Cola Co., which sank $7.625, rose $2.937, to $68.0625.

"The individual investor, after seeing the bloodletting [Monday], has decided that stocks are cheap," said Joseph V. Battipaglia, chief investment strategist at Gruntal & Co. LLC in New York. "It is the buy-the-dip strategy."

Battipaglia said he expects the stock market to rise because investors have taken into consideration the economic problems in Russia and Asia. Battipaglia added that he anticipates good news from those parts of the world, which could send the Dow up another 1,500 points.

Earlier in the year he predicted that the index would reach 9,500 points.

"I'm sticking with it," he said. "You could get a very explosive move here."

He also believes the Russell 2000, which has fallen more than 20 percent this year, will rise nearly 30 percent to 450 points by the end of December.

"Each and every stock on the average is down 40 to 50 percent," he said. "If I get this called right, these stocks should be some of the most exciting to the upside."

Other bulls came out in defense of the market yesterday, including Abby Joseph Cohen, the strategist at Goldman, Sachs & Co., who is closely watched by investors because she has been so accurate in her predictions. She told investors she is betting on the strength of the U.S. economy to push the market higher, and that they should ante up and put more money into equities.

Larry J. Puglia, manager of Baltimore-based T. Rowe Price Associate Inc.'s Blue-Chip Growth Fund, which has $3 billion in assets under management, agreed. He continued to load his portfolio yesterday with cheap stocks.

On Monday, he went on a shopping spree, picking up as many as 30 stocks at the end of the day when the market started plunging. He bought stocks that included Bank of New York, CBS Corp. and Eli Lilly and Co.

"We got those at pretty good prices," he said.

Puglia said investors have "overreacted" to the issues in Russia.

"While the problems in Russia, when considered in combination with the problems in Asia and Japan are certainly significant, the fundamental backdrop is still very solid for U.S. companies," he said.

Dow's big gains

The Dow Jones industrial average had its second biggest point gain yesterday, but was not even close to being among the biggest percentage gains. In terms of points gained, here are the best days for the average, including the percentage change in value.

Date ........ Points .... Pct.

10/29/97 .... 337.17 .... 4.7

Yesterday ... 288.36 .... 3.8

9/2/97 ...... 257.36 .... 3.4

11/3/97 ..... 232.31 .... 3.1

2/2/98 ...... 201.28 .... 2.5

12/2/97 ..... 189.98 .... 2.4

10/21/87 .... 186.84 .... 10.1

4/29/97 ..... 179.01 .... 2.6

9/16/97 ..... 174.78 .... 2.3

4/22/97 ..... 173.38 .... 2.6

Pub Date: 9/02/98

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