U.S. stocks surge

Dow climbs 368

All indexes gain after dismal week

Nasdaq up 76

Investors seek bargains

Many analysts note `uncertainties,' say rally is not imminent

September 25, 2001|By William Patalon III | William Patalon III,SUN STAFF

Stocks posted big gains yesterday - with the Dow Jones industrial average soaring more than 368 points - as investors scouted out bargains after that blue-chip index dropped more than 14 percent last week.

The run-up in share prices was the first since the Sept. 11 terrorist attacks, which severely damaged parts of the Wall Street financial district and forced U.S. stock markets to close for four days.

Even so, most analysts were reluctant to say the big jump in share prices signaled the beginning of a rally.

"There are too many uncertainties, too many variables," said Phil Dyer, a senior manager for Wealth Management Services, an investment advisory firm in Towson. "In addition to all the market uncertainties we faced before, there are three or four other major uncertainties now," including when or how the U.S. military might strike back against the terrorists.

The Dow climbed 368.05 points, or 4.47 percent, to close at 8,603.86. The broader Standard & Poor's 500 index gained 37.65 points, or 3.90 percent, to finish at 1,003.45. The technology-focused Nasdaq composite index jumped 76.21 points, or 5.35 percent, to end the day at 1,499.40.

Three stocks rose for every one that fell on the New York Stock Exchange, where 1.7 billion shares were traded.

Before yesterday, the Dow had fallen for eight days running, including three prior to the attack. The drop of 14.3 percent last week was that index's biggest since 1933, during the Great Depression.

At the same time, the S&P 500 lost 12 percent, reaching its lowest level in almost three years. The Nasdaq shed 16 percent, leaving it almost 75 percent below its March 2000 all-time peak.

Some bullish calls by well-known Wall Street stock strategists added fuel to the advance, experts say. Goldman, Sachs & Co. strategist Abby Joseph Cohen recommended that investors shift more of their money into stocks and out of bonds. In a note to investors titled "Stand Up! Time to Buy Stocks," Cohen raised the percentage share that stocks occupied in her model investment portfolio from 70 percent to 75 percent. She cut back her bond allocation from 27 to 22 percent and held steady at 3 percent cash.

Thomas McManus, a strategist for Banc of America Securities LLC, boosted his stock allocation to 70 percent yesterday after having raised it to 65 percent Thursday.

While experts agreed that last week's huge sell-off may have been overdone, they cautioned that a substantial number of pitfalls remain. First is the U.S. economy. Although a downturn clearly was under way before the attacks, economists differed on whether it was an actual recession.

Now, however, experts say that if the American economy wasn't already in a recession, it very likely is now.

During the spring and summer months - and in the face of the worst slowdown in corporate capital investment in more than a decade - consumers continued to spend. That propped up the economy, since consumer spending accounts for two-thirds of the nation's output.

Now, however, analysts fear that consumer confidence has plunged, which may well be enough to push the country into its first recession since 1990-1991.

Confidence ebbs

Investor optimism this month fell to its lowest level in nearly five years, on concerns the economy will take much longer to recover than it would have before the attacks, a UBS Warburg PaineWebber Inc., report said. Investor confidence in the prospects for growth in corporate profits over the next 12 months is dropping, which translates into a lower optimism for growth in stock prices, according to the report.

U.S. companies will begin reporting their third-quarter earnings, and many disappointments are expected, said David Citron, a managing director for the local office of Carret and Co. LLC, a New York money management firm. "This was just a trader's rally," Citron said.

Elsewhere on the broad market, the Russell 2000 index, a benchmark of small-cap stocks, soared 14.90 to 393.79, and the Wilshire 5000 total market index surged 59.91 to 14,751.64.

The Sun-Bloomberg index of the top stocks in Maryland spurted 5.15 to 177.34. Meridian Medical Tech Inc. jumped $3.01 to $15, and F&M Bancorp/Frederick climbed $2.91 to $25.21. Ciena Corp. rose 84 cents to $11.38.

Among Wall Street's winners, Minnesota Mining & Manufacturing Co. soared $4.69 to $91.67, Citigroup Inc. climbed $2.64 to $39, and Wal-Mart Stores Inc. advanced $2.62 to $47.28. Insurer American International Group, which expects its pretax losses from the attack to total $500 million, rose $3.95 to $71, recouping some heavy losses from last week.

JDS Uniphase Corp. jumped $1.03, or 19 percent, to $6.39. The biggest maker of parts used in fiber-optic networks said it sees "early signs of stabilization" in its business and completed work force reductions quicker than planned.

Corning Inc., the biggest maker of glass fiber cable, advanced 92 cents to $10.04.

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