Dow soars to record point gain

499-point surge comes as Nasdaq also rises, ending 3-day sell-off

`This is kind of unheard of'

Dow up 820 in 2 days as investors continue their `flight to quality'

March 17, 2000|By William Patalon III | William Patalon III,SUN STAFF

The Dow Jones industrial average soared nearly 500 points yesterday -- its biggest single-day point gain in history -- as investors continued to pile into the "Old Economy" stocks that as late as last week had been left for dead.

The lately ailing "New Economy" stocks joined the charge: The Nasdaq composite index surged more than 134 points, ending a three-day sell-off that had seen the important technology index shed nearly 10 percent of its value.

"It is a heck of a day, no question about it," said Mark Vitner, vice president and economist for First Union Corp., in Charlotte, N.C. "This is kind of unheard of."

For the day, the Dow climbed 499.19 points, or 4.93 percent, ending the trading session at 10,630.60, and smashing the previous record point gain of 380.53 on Sept. 8, 1998, but nowhere near the record 15.34 percent jump in 1933.

The 30-stock index, viewed as a blue-chip bellwether, rose 320.17 points on Wednesday, bringing its two-day gain to almost 820 points. The two-day increase of 8.35 percent was the biggest since Oct. 20-21, 1987 -- when the Dow was recovering from the 1987 stock market crash.

Even with the gain, the index remains down 9.3 percent from its Jan. 14 closing record of 11,722.98. Since then, the Dow has twice dipped low enough from that record high to approach the 20 percent decline that most say signifies a bear market.

A much broader index, the Standard & Poor's 500, climbed 66.33 points, or 4.76 percent, and ended the day at 1,458.47. That, too, set a record as the largest point gain for the S&P 500, and left it within 1 percent of its all-time high.

The Nasdaq, in negative territory for much of the day -- it was down more than 127 points before noon, reversed course to finish up 134.77 points, or 2.94 percent, closing at 4,717.39.

"After four days of hard selling in the Nasdaq, we may be getting to an end," said Larry Seibert, a money manager with Barrett Associates in New York. "Prices have come to the point that we're nibbling."

Dow and Nasdaq gain

What was especially important about yesterday's market performance was that the Dow and Nasdaq turned in strong gains in tandem. Over the past month, daily trading increasingly resembled a tug of war between Old Economy stocks and the shares in the telecommunications, information technology, Internet and biotechnology companies that investors associate with the New Economy.

The Nasdaq set 15 record highs during this year's early going, while the Dow punished investors who had thrown in their lot with once-dependable blue chips. This week, Dow stocks recovered, but at the expense of the tech stocks that make the Nasdaq their home.

Yesterday was the best of times for Old Economy Dow members such as Alcoa Inc. (up $4.875 to $68.9375), General Motors Corp. (up $4.9375 to $83.75) and DuPont (up $2.875 to $53.50) that had lately seen the worst of times.

"It's been like the `Tale of Two Markets,' " said Angel Mata Jr., senior vice president of listed stocks for Legg Mason Inc. in Baltimore.

The divergence between the indexes, as well as the now-daily volatility -- the big swings in stock prices and market indexes that thrill some investors and vex others -- was becoming a point of worry with professional investors, because such peculiarities have at times been the advance guard of nasty bear markets.

And when there were gains, particularly in the Dow, they were often due to strong performance from just a few stocks. Market breadth -- the number of stocks going up compared to the number going down -- was very poor, which is also the sign of a sick stock market. Yesterday, more than three stocks rose for every one that fell on the New York Stock Exchange, the broadest advance in 18 months.

"Virtually all of these stocks that are rising have been so badly beaten down that, even with their gains, they are just becoming attractive," said Howard Kornblue, a money manager for the Phoenix-based Pilgrim Funds.

Analyzing investors

Legg Mason's Mata believes this week's action shows that, at least for now, there's been a fundamental change in the way investors approach the market. In the past, during periods of uncertainty, there would be a so-called "flight to quality" -- typically a shift from stocks into government or high-quality corporate bonds. With so many consumers now in the stock market -- through retirements plans or regular, taxable brokerage accounts -- Mata says that a flight to quality may now be signified by an investor shift from high-risk stocks into low-risk shares, such as the blue chips that make up the Dow.

Investors were clearly busy, as well as enthusiastic, in their trading yesterday. The Big Board had its busiest day ever, with almost 1.5 billion shares changing hands. The Nasdaq stock market saw 2 billion shares traded, the seventh most ever.

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